Fema Situation Updates

16 Jun 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Clarksville Gas and Water
Disaster Number: 
1909-DR-TN
DSR: 
PW 5374
Date Signed: 
Monday, June 15, 2015
PA ID: 
125-U00B3-00
Summary/Brief: 

Conclusion:  As required by 44 C.F.R. § 206.223(a), the second appeal does not provide the level of information necessary to make a PA eligibility determination regarding the Applicant’s requested work items.  Specifically, the Applicant failed to demonstrate that the requested work was the result of the disaster.

Summary Paragraph

Beginning on April 30, 2010, severe storms, tornadoes, heavy rains, high winds, flooding, and flash flooding affected the City of Clarksville.  As a result, several buildings—collectively known as the Primary Clarifier Complex— within the Applicant’s wastewater treatment plant were inundated with floodwaters.  Project Worksheet (PW) 5374 was prepared to reflect costs to replace or repair damage to the Facility.  Upon review of PW 5374, FEMA determined that the Facility is located within a United States Army Corps of Engineers (USACE) flood easement which held harmless the United States Government from all losses resulting from flood.  As such, FEMA determined that the repair work was ineligible for Public Assistance (PA) funding, and PW 5374 was obligated for zero dollars. In the first appeal letter, the Applicant asserted that the USACE easement did not contain an indemnification provision in favor of the United States, the Cost Estimating Format (CEF) omitted ancillary material and equipment costs and did not fully account for labor costs associated with work performed, and PW 5374 was eligible for additional funding for project management tasks and Direct Administrative Costs (DAC) associated with the Facility’s repair work.  The Regional Administrator (RA) partially granted the first appeal for $22,039.85 for costs disallowed due to a USACE easement, project and construction management costs, and DAC.   The RA denied funding associated with work items excluded from the scope of work in PW 5374 because the appeal’s supporting documentation made no distinction between work already accounted for in the CEF and the specific appealed scope addition or cost increase.  In the second appeal, the Applicant requests $126,029.71 in additional PA funding for excluded work items. 

Authorities and Second Appeals

  • Stafford Act § 406, 42 U.S.C. § 5172.
  • 44 C.F.R. § 206.223(a).
  • 44 C.F.R. § 206.228.
  • OMB Circular A-87, 2 C.F.R. § 225.

Headnotes

  • The Stafford Act § 406 authorizes FEMA to make contributions to a local government to restore eligible facilities on the basis of the design of such facilities as they existed immediately prior to the disaster.
  • 44 C.F.R. § 206.223(a) states an eligible item of work must be required as the result of the disaster event.
    • The Applicant’s second appeal does not provide sufficient documentation to demonstrate that the requested work items are the result of the disaster.
Letter: 

06/15/2015

David Purkey
Director
Tennessee Emergency Management Agency
3041 Sidco Drive, P.O. Box 41502
Nashville, Tennessee 37204-1502

Re: Second Appeal – Clarksville Gas and Water, PA ID 125-U00B3-00, FEMA-1909-DR-TN, Project Worksheet (PW) 5374 – Scope of Work

Dear Mr. Purkey:

This is in response to a letter from your office dated July 10, 2014, which transmitted the referenced second appeal on behalf of Clarksville Gas and Water (Applicant).  The Applicant appealed a total of seven PWs; the remaining PWs will be addressed in separate determination letters.  Regarding PW 5374, the Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of an additional $126,029.71 in Public Assistance (PA) funding requested for excluded work items for the Primary Clarifier Complex.

As explained in the enclosed analysis, I have determined the Applicant failed to demonstrate that the requested work items are eligible under the PA Program pursuant to 44 C.F.R. § 206.223.  Therefore, I am denying the appeal.

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.
 

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

cc: Garcia Szczech
     Regional Administrator
     FEMA Region IV

Analysis: 

Background

Beginning on April 30, 2010, severe storms, tornadoes, heavy rains, high winds, flooding, and flash flooding affected the City of Clarksville.  As a result, several buildings—collectively known as the Primary Clarifier Complex (Facility)—within the Clarksville Gas and Water’s (Applicant) wastewater treatment plant were inundated with floodwaters.  Project Worksheet (PW) 5374 was prepared to reflect costs to replace or repair damage to the Facility.  Upon review of PW 5374, FEMA determined that the Facility is located within a United States Army Corps of Engineers (USACE) flood easement which held harmless the United States Government from all losses resulting from flood.  As such, FEMA determined that the repair work was ineligible for Public Assistance (PA) funding, and PW 5374 was obligated for zero dollars.

First Appeal

In its first appeal letter, dated June 24, 2011, the Applicant presented three issues.  First, the Applicant asserted that the USACE easement did not contain an indemnification provision in favor of the United States.  Second, the Applicant asserted that the Cost Estimating Format (CEF) omitted ancillary material and equipment costs and did not fully account for labor costs associated with work performed.  Accordingly, the Applicant requested a revised scope of work and additional PA funding in PW 5374.  Lastly, the Applicant requested additional funding for project management tasks and Direct Administrative Costs (DAC) associated with the Facility’s repair work.

On May 13, 2014, the Region IV Regional Administrator (RA) partially approved the first appeal finding eligible $22,039.85 for costs disallowed due to a USACE easement, project and construction management costs, and DAC.  The RA denied funding associated with work items excluded from the scope of work in PW 5374 because the appeal’s supporting documentation made no distinction between work already accounted for in the CEF and the specific appealed scope addition or cost increase.

Second Appeal

 

Through its June 30, 2014 second appeal, the Applicant requests $126,029.71[1] in additional PA funding for excluded work items.  The Applicant claims $67,029.71 for six days of labor to complete work performed on the Facility that was not captured in the CEF for the original version of PW 5374.  In addition, the Applicant requests $58,997.01 for the repair or replacement of data conduits, data cable installation, data cable terminations, instrumentation installation, instrumentation conduit installation, instrumentation cable installation, and instrumentation cable terminations throughout the Facility.  The Applicant provides four supporting documents to substantiate its request for additional funding. 

Discussion

The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), Section 406, authorizes FEMA to make contributions to a local government to restore eligible facilities on the basis of the design of such facilities as they existed immediately prior to the disaster.[2]  Pursuant to Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.223(a), which implements that provision, an eligible item of work must be, among other things, required as the result of the disaster event.[3]  Typically, FEMA reimburses costs that can be directly tied to the performance of eligible work.[4]  The Applicant must substantiate eligible costs with adequate documentation.[5]

The Applicant submitted four supporting documents related to PW 5374 with its second appeal.  The first, Exhibit 1, is an undated and unsigned bulleted list of uncompleted items.  The second document is the CEF attached to PW 5374 which reflects six days of labor performed by Shermco and Harlan Labor (Contractor).  The third document provides names of laborers, dates they worked, and hours worked.  The Applicant states this document demonstrates the difference between the PW estimate and the actual labor cost.  Finally, the fourth document, Attachment C, lists various electrical components and equipment and their associated costs.  These documents provide greater detail regarding the work items the Applicant wants included in the revised PW scope of work.  However, without a detailed explanation demonstrating where the damage occurred within the Facility and how the work requested addresses damage caused by the disaster, these documents do not sufficiently meet the criteria required by 44 C.F.R. § 206.223 to support PA funding.[6]  Accordingly, FEMA cannot approve an expanded scope of work to include the Applicant’s requested items.

Conclusion

As required by 44 C.F.R. § 206.223(a), the second appeal does not provide the level of information necessary to make PA eligibility determinations regarding the Applicant’s requested work items.  Specifically, the Applicant failed to demonstrate that the requested work was the result of the disaster.  Accordingly, this appeal is denied.



[1] In the second appeal, there is a discrepancy in the Applicant’s requested amount.  The Applicant requests a total of $126,029.71 in additional funding.  However, the breakdown of the additional amount adds up to $126,026.72 (67,029.71 + $58,997.01).

[2] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 406, 42 U.S.C. § 5172 (2007).

[3] See 44 C.F.R. § 206.223(a) (2009).

[4] See generally, 44 C.F.R. § 206.228; see also Public Assistance Guide, FEMA 322, at 40 (June 2007).

[5] See OFFICE OF MGMT. & BUDGET, EXEC. OFFICE OF THE PRESIDENT, OMB CIRCULAR A-87, COST PRINCIPLES FOR STATE, LOCAL, AND INDIAN TRIBAL GOVERNMENTS (2004) (codified at 2 C.F.R. § 225).

[6] On October 7, 2014, FEMA sent a Request for Information (RFI) to the Applicant and Grantee requesting documentation connecting the labor logs provided with the second appeal to specific elements of PW 5374’s scope of work.  FEMA provided examples of acceptable documentation, including but not limited to, a detailed list of all damaged elements beyond what is listed in the PW including documentation of the nature and extent of the damage, a detailed scope of work provided within bid documents; a breakdown of which organization—Allied Technical Services, Shermco Industries, Harlan, and Hazen and Sawyer—was responsible for which parts of the work completed; and documentation of work completed, such as a scope of work with percent-complete by task item.  As of issuance of this appeal response, neither the Applicant nor the Grantee has submitted any documentation in response to the RFI. 

16 Jun 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
City of Southbay
Disaster Number: 
1609-DR-FL
DSR: 
PW 5403
Date Signed: 
Monday, June 15, 2015
PA ID: 
099-67175
Summary/Brief: 

Conclusion:  The City of Southbay’s (Applicant) first appeal was submitted more than 60 days after the final determination regarding costs of PW 5403.  In addition, the Grantee submitted the Applicant’s second appeal after the 60 day regulatory timeframe.  As such, the Applicant’s first and second appeals fail to meet the procedural requirements of 44 C.F.R. § 206.206(c).  Timeliness aside, the Applicant did not provide adequate documentation to justify an additional $16,300.75 in PA funding.

Summary Paragraph

Hurricane Wilma created significant vegetative debris throughout the City of Southbay.  FEMA prepared PW 5403 to reflect debris removal costs.  During closeout, FEMA determined that the Applicant’s documentation did not reflect the costs claimed for all of the debris removal work.  FEMA de-obligated $5,088.02 due to truck certification discrepancies.  In an undated first appeal, the Applicant asserted that it never submitted 24 load tickets related to the debris removal project encompassed in PW 5403 because they were missing at the time of close out.  In addition, the State of Florida (Grantee) asserted that the reimbursement for the uncaptured load tickets was originally undertaken through the interim inspection process, however, the process stalled at a certain point.  The FEMA Region IV Regional Administrator (RA) determined that the Applicant’s request to include additional costs for the missing load tickets was untimely as it was submitted two and a half years after the closeout version was issued.  In the second appeal, the Applicant asserts personnel changes, untrained staff, and internal and external deadlines following Hurricane Wilma led to its failure to submit documentation for unclaimed costs.  Due to these unforeseen consequences, the Applicant requests FEMA re-obligate $5,088.02 in PA funding and amend the closeout version of PW 5403 to include $11,212.73 for the 24 load tickets.  
Authorities and Second Appeals

  • Stafford Act Sections 403 and 407.
  • Stafford Act Section 423.
  • 44 C.F.R. § 206.206.
  • 44 C.F.R. § 206.224.
  • OMB Circular A-87, 2 C.F.R. § 225.

Headnotes

  • Pursuant to the Stafford Act § 423 and 44 C.F.R. § 206.206(c)(1), the Applicant must submit an appeal of a FEMA determination within 60 days of receipt of such determination.
    • FEMA received an undated first appeal for PW 5403 two and a half years after the regulatory timeframe, thus, making the first appeal untimely.
  • Pursuant to 44 C.F.R. § 206.206(c)(2), the Grantee must submit appeals from an Applicant, with a written recommendation, to the RA within 60 days of receipt.
    • The Grantee submitted the Applicant’s second appeal a year after the regulatory timeframe, thus, making the second appeal untimely.
  • OMB Circular A-87 requires procurement costs to be adequately documented.

The Applicant failed to provide adequate documentation demonstrating proper truck certification. 

Letter: 

06/15/2015


Bryan W. Koon
Director
State of Florida Division of Emergency Management
2555 Shumard Oaks Boulevard
Tallahassee, Florida  32399-2100

Re: Second Appeal – City of Southbay, PA ID 099-67175, FEMA-1609-DR-FL, Project Worksheet (PW) 5403 – Time Extension – Appeal

 

Dear Mr. Koon:

This is in response to a letter from your office dated August 22, 2014, which transmitted the referenced second appeal on behalf of the City of Southbay (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $16,300.75 in Public Assistance (PA) funding for debris removal work performed following Hurricane Wilma.

As explained in the enclosed analysis, the appeal was not submitted within the regulatory timelines established in 44 C.F.R. § 206.206.  Additionally, I have determined that the Applicant has not provided adequate documentation to justify the obligation of $16,300.75 in PA funding.  Therefore, I am denying the appeal.

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.
 

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

cc: Garcia Szczech
     Regional Administrator
     FEMA Region IV

Analysis: 

Background

In October 2005, Hurricane Wilma caused heavy rains and powerful winds that generated mixed storm debris throughout the City of Southbay (Applicant).  The Applicant utilized a debris removal contract with Phillips and Jordan, Inc. (Contractor) to remove and dispose of storm debris located on its public rights-of-way.  The Contractor disposed of 12,576.9 cubic yards (CY) of debris following Hurricane Wilma.  FEMA prepared Project Worksheet (PW) 5403 to address the debris-related work.  During closeout, FEMA determined that the Applicant’s documentation did not reflect the costs claimed for all of the debris removal work, and de-obligated $5,088.02 due to truck certification discrepancies.  On September 2, 2010, PW 5403 was obligated for $145,834.78.  The Grantee was notified of FEMA’s final determination in a letter dated September 8, 2010.   

First Appeal

In an undated, unaddressed document proffered as an appeal,[1] the Applicant asserted that “24 load tickets were missing and they never have been submitted for reimbursement to your office.” The Applicant further argued, without substantiating documentation, that the missing load tickets were issued by the “same vendor that was contracted to remove debris in the city.”

The Grantee noted that $5,088.02 was deobligated from PW 5304 in its January 4, 2013 letter forwarding the Applicant’s appeal.  In addition, the Grantee asserted that the Applicant’s 24 load tickets represented eligible work, totaling $11,212.73, that was not captured in PW 5403.  The Grantee contended that the load ticket costs should be added to the closeout version of PW 5403, but did not specify whether the Applicant was appealing FEMA’s determination to de-obligate $5,088.02 from PW 5403.  Finally, the Grantee stated, with no further explanation, that the Applicant’s first appeal was received in a timely manner.  

In the first appeal response dated May 24, 2013, the FEMA Region IV Regional Administrator (RA) found that the closeout version of PW 5403[2] constituted FEMA’s final determination of costs for the project.  As such, the Applicant’s request to include additional costs for the missing load tickets was untimely as it was submitted to FEMA 28 months after the closeout version was issued.  In addition, the RA determined that the de-obligation of $5,088.02 for documentation discrepancies was not germane to the issue presented in the first appeal.  Accordingly, the appeal was denied.

Second Appeal

The Applicant asserts in its second appeal dated July 10, 2013, that personnel changes following Hurricane Wilma led to delays in submitting documentation to FEMA regarding PW 5403, indicating that its staff’s inadequate training and understanding of the process resulted in the documentation not being provided properly.  The Applicant states that internal and external deadlines also led to a rushed process for submitting documentation to FEMA.  Finally, the Applicant states it is not seeking reimbursement of $5,088.00 deobligated during the closeout of PW 5403.

In a letter dated August 22, 2014, the Grantee argues that, while FEMA determined that $5,088.02 in PA funding was ineligible due to documentation discrepancies, it failed to indicate which truck certifications were in question.  The Grantee asserts that the Applicant checked internal records and found no discrepancies.  The Grantee concludes that the Applicant cannot properly respond to FEMA’s determination without additional details regarding the deduction in funding.  Additionally, the Grantee requests FEMA draft a new version of PW 5403 to include costs associated with the 24 load tickets.

Discussion

Appeal Timeliness

Pursuant to the Stafford Act § 423 and 44 C.F.R. § 206.206(c)(1), an eligible Applicant may appeal any determination previously made related to an application for PA funding within 60 days of receiving notice of the action that is being appealed.  In addition, pursuant to 44 C.F.R. § 206.206(c)(2), the Grantee must submit appeals from an Applicant, with a written recommendation, to the Regional Administrator within 60 days of receipt.[3]  Neither the Stafford Act nor its implementing regulations provide FEMA authority to grant time extensions for filing first or second appeals.[4]

The closeout version of PW 5403 was obligated on September 2, 2010.  While the Applicant’s first appeal is undated, the Grantee’s letter transmitting the appeal to FEMA is dated January 4, 2013.  While the Grantee asserted that the Applicant’s first appeal was received in a timely manner, it did not explain why it failed to forward the first appeal to FEMA within the regulatory timelines.  In the first appeal determination, the RA noted that the first appeal was submitted more than two years after the final determination of costs for PW 5403; therefore, the appeal was denied based on timeliness.  Although the Applicant’s second appeal provides an explanation regarding the delay of its first appeal, FEMA does not have the authority to waive or extend the 60 day statutory and regulatory timeframes.  Accordingly, the RA’s first appeal determination regarding timeliness was appropriate.

Regarding the second appeal, the Applicant submitted it within 60 days of receipt of FEMA’s first appeal determination.  However, the Grantee’s letter dated August 22, 2014, seeking clarification of the deobligation, was submitted to FEMA after the regulatory timeframe lapsed.  As such, the Applicant’s second appeal failed to meet the procedural requirements of 44 C.F.R. § 206.206(c)(2) and consequently is denied.  Timeliness aside, as described below, the second appeal also is not meritorious on the substantive issues and would otherwise be denied.  

Allowable Costs

Pursuant to the Stafford Act §§ 403 and 407, FEMA Public Assistance (PA) funding may be available to a state or local government for debris removal if the work is essential to saving lives and protecting property or in the public interest.[5]  Costs associated with debris removal work are eligible for PA funding if the costs are reasonable and necessary to accomplish the work and in compliance with federal and state procurement requirements.[6]  Pursuant to 44 C.F.R. § 13.22, only allowable costs are eligible for Public Assistance funding.  In addition, all allowable procurement costs must be adequately documented.[7]                                                                  

In PW 5403, FEMA determined that the debris removal work was eligible and the contract used to complete the work followed proper procurement standards.  FEMA also determined that the majority of costs claimed in PW 5403 were eligible under the PA Program.  However, during closeout, FEMA found discrepancies with three truck certification forms which caused FEMA to deobligate $5,088.02 in PA funding.  Neither in their first appeal, nor in their second has the Applicant provided adequate documentation regarding the truck certification discrepancies.[8]  Rather, they have only asserted that their process for obtaining reimbursement was stalled due to, among other things, personnel changes.  A truck certification list, including size of hauling bed in cubic yards, license plate number, truck identification number assigned by the owner, and a short physical description of each truck constitutes adequate documentation.[9]  Additionally, regarding the additional 24 load tickets, such items do not, in and of themselves demonstrate the work performed  was compliant with 2 C.F.R. § 225, FEMA 325, and other FEMA policy and guidance.[10]  The Applicant has failed to substantiate that the work associated with the 24 load

tickets, totaling $11,212.73, is eligible.  In addition, it has not explained why the $5,088.22 should be re-obligated.  As such, FEMA cannot reimburse these costs.  

Conclusion

The Applicant’s first appeal was submitted more than 60 days after the final determination regarding costs of PW 5403.  In addition, regarding the second appeal, the Grantee submitted their request for clarification of the deobligation after the 60 day regulatory timeframe.  As such, the Applicant’s first and second appeals failed to meet the procedural requirements of 44 C.F.R. § 206.206(c).  Timeliness aside, the Applicant has not provided adequate documentation to justify re-obligating $5,088.02 in PA funding nor substantiated that funding for the 24 load tickets meets all eligibility requirements.  The second appeal is denied.



[1] Pursuant to 44 C.F.R. § 206.206(a) , an appeal of a FEMA determination must contain documented justification supporting the appellant's position, specifying the monetary figure in dispute, and citing the provisions in Federal law, regulation, or policy with which the appellant believes the initial action was inconsistent.  The statement submitted by the Applicant lacks these three criteria.   

[2] Project Worksheet 5403, City of Southbay, Version 6 (Sep. 2, 2010).

[3] 44 C.F.R. § 206.206(c)(2).

[4] But see Public Assistance Guide, FEMA 322 at 86 (Oct. 1999) [hereinafter PA Guide] (stating, “[t]he State will then prepare a written recommendation on the merits of the appeal and forward that recommendation to FEMA within 60 days of its receipt of the appeal letter or receipt of additional information that it had requested.” (Emphasis added).  However, it is important to note that this language is not found in the Stafford Act or 44 C.F.R., and it only applies to first level appeals.)

[5] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, §§ 403 and 407, 42 U.S.C. §§ 5170b and 5192 (2003); see also 44 C.F.R. § 206.224(a). 

[6] See OFFICE OF MGMT. & BUDGET, EXEC. OFFICE OF THE PRESIDENT, OMB CIRCULAR A-87, COST PRINCIPLES FOR STATE, LOCAL, AND INDIAN TRIBAL GOVERNMENTS (2004) (codified at 2 C.F.R. § 225), Basic Guidelines, at 8; see also 44 C.F.R. § 13.36.

[7] See OMB Circular A-87, 2 C.F.R. § 225. 

[8] Grantee Second Appeal Letter, City of Southbay, FEMA-1609-DR-FL, at 1 (Aug. 22, 2014) (stating the Applicant is unable to respond to FEMA’s determination regarding truck certification discrepancies because FEMA did not specify which certifications were questioned, and the Applicant found no discrepancies in its records).  However, pursuant to 44 C.F.R. § 206.206(c), the Applicant’s request for clarification should have occurred within 60 days of the final determination. 

[9] Public Assistance Debris Management Guide, FEMA 325, at 109 (April 1999) [hereinafter FEMA 325].

[10] See OMB Circular A-87, 2 C.F.R. § 225; see also FEMA 325 (stating that applicants must maintain and update notarized lists of trucks involved in debris removal operations); see also FEMA Second Appeal Analysis, City of West Miami, FEMA-1602-DR-FL, at 1 (Feb. 18, 2014) (finding that FEMA requires Applicant to substantiate truck certifications through notarized lists).

16 Jun 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
City of Duluth
Disaster Number: 
4069-DR-MN
DSR: 
Multiple PWs
Date Signed: 
Monday, June 15, 2015
PA ID: 
137-17000-00
Summary/Brief: 

Conclusion:  The Applicant’s claimed DAC constituted indirect costs because they were not assigned to specific projects as required by DAP9525.9.  The claimed costs were divided evenly across multiple PWs, pertained to sites subject to multiple PWs, or constituted expenses that did not correspond to any one specific project.  Therefore, funding for DAC is denied. 

Summary Paragraph

Between June 14 and June 21, 2012, severe storms and resulting flooding caused damage to buildings, public works facilities, and equipment owned and operated by the City of Duluth (Applicant).  Dozens of facilities sustained flood-related damage.  The Applicant retained a contractor, Adjusters International, Inc. (AI) to assist with the disaster recovery process.  FEMA, the State of Minnesota Homeland Security and Emergency Management (Grantee), the Applicant, and AI agreed that the direct administrative costs (DAC) incurred would be managed separately from the project formulation process in order to avoid delaying project obligation.  The Applicant provided FEMA with an invoice of the contractor’s claimed costs that included expenses that could not be charged directly to a particular project as required by DAP9525.9,  Section 324 Management Costs and Direct Administrative Costs.  FEMA therefore disallowed those indirect expenses from the amount of DAC claimed by the Applicant.  The Applicant appealed, arguing that the claimed DAC represented work that corresponded to specific projects and that its allocation of the total amount of claimed travel expenses across all sites was a reasonable approach.  The Regional Administrator denied the appeal, explaining that claimed costs that simply were divided evenly across multiple PWs or that applied to a specific flood-damage site that later was subject to multiple PWs constituted indirect costs, and travel expenses supporting all of the Applicant’s PWs are not direct costs.  On second appeal, the Applicant again asserts that the claimed DAC was not divided across multiple PWs and that its costs, including travel expenses, correlate with specific projects.

Authorities and Second Appeals

  • 44 C.F.R. § 207
  • Disaster Assistance Policy DAP9525.9, Section 324 Management Costs and Direct Administrative Costs
  • Memorandum from Elizabeth A. Zimmerman, Assistant Administrator, Disaster Assistance Directorate, to Regional Administrators, Acting Regional Administrators, Transitional Recovery Office Directors, Federal Coordinating Officers, and Disaster Assistance Division Directors (Sept. 8, 2009)
  • Public Assistance Guide, FEMA 322 at 63 (June 2007)

Headnotes

  • Under 44 C.F.R. § 207, grantees and applicants have the opportunity to obtain reimbursement for management costs—indirect costs, administrative expenses, and any other expenses that a grantee or subgrantee reasonably incurs in administering and managing the PA grant that are not directly chargeable to a specific project.
  • Under Disaster Assistance Policy DAP9525.9, Section 324 Management Costs and Direct Administrative Costs, applicants may be reimbursed for direct administrative costs— costs that can be identified separately and assigned to a specific project.
    • The Applicant’s claimed DAC constituted indirect costs because they could not be assigned to specific projects; claimed costs were divided evenly across multiple PWs, pertained to sites subject to multiple PWs, or constituted expenses that did not correspond to any one specific project.
Letter: 

06/15/2015

Joe Kelly
Director
Minnesota Homeland Security and Emergency Management
445 Minnesota Street - Suite 223
Saint Paul, Minnesota  55101-6223

Re: City of Duluth, PA ID 137-17000-00, FEMA-4069-DR-MN, Multiple Project Worksheets (PWs) – Direct Administrative Costs

Dear Mr. Kelly:

This is in response to a letter from your office dated March 27, 2014, which transmitted the referenced second appeal on behalf of the City of Duluth (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency (FEMA) denial of certain claimed direct administrative costs associated with recovery from 2012 flood damage.

As explained in the enclosed analysis, the Applicant retained a contractor to assist in the recovery process, and claimed direct administrative costs (DAC) incurred by the contractor separately from project formulation.   The documentation that Applicant provided FEMA summarizing the contractor’s claimed costs, however, included numerous expenses that could not be charged directly to a particular project in accordance with Disaster Assistance Policy 9525.9, Section 324 Management Costs and Direct Administrative Costs.  FEMA properly disallowed those indirect expenses from the amount of DAC claimed by the Applicant. Therefore, I am denying the appeal.

Please inform the Applicant of my decision.  This determination constitutes the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.
 

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

cc: Andrew Velasquez III
     Regional Administrator
     FEMA Region V

Analysis: 

Background

Between June 14 and June 21, 2012, severe storms and resulting flooding caused damage to buildings, public works facilities, and equipment owned and operated by the City of Duluth (Applicant).  Dozens of facilities sustained flood-related damage.

On July 6, 2012, the president declared a major disaster for the state (FEMA-4069-DR-MN).  The Applicant retained a consulting firm to assist with the disaster recovery process.  FEMA, the State of Minnesota Homeland Security and Emergency Management (Grantee), and the Applicant agreed that the direct administrative costs (DAC) incurred would be managed separately from the project formulation process in order to avoid delaying project obligation.  An August 30, 2012 concept of operations plan agreed to by the parties memorialized this plan and noted that “[d]etermining the eligibility of DAC[] for an applicant[-]hired contractor… is complicated” because FEMA requires “proper documentation of hours and work, demonstration of the skills and knowledge of the individuals hired, identification of eligible work, and the determination of cost reasonableness.”  The plan explained that by handling DAC separately from project formulation, unnecessary delay could be avoided and proper documentation collected.

The consulting firm discontinued its work for the Applicant while the recovery effort was ongoing.  The Applicant submitted a final invoice dated December 14, 2012, for claimed direct administrative costs incurred by the consulting firm.  The Applicant claimed a total of $297,276.22 in DAC.  On March 14, 2013, FEMA informed the Grantee that $270,341.11 of the claimed amount was not eligible for reimbursement as DAC.  FEMA explained that it removed over 80 indirect tasks that had their costs evenly divided across multiple PWs. FEMA also removed tasks not tied to a specific PW, together with travel expenses allocated to every task on every PW in proportion to the hours worked. 

First Appeal

The Applicant submitted a first appeal to the Grantee in a letter dated May 15, 2013.  As to costs determined ineligible as DAC, the Applicant asserted that its claimed DAC “was not randomly divided among PWs” but, instead, was incurred by the consulting firm on numerous sites on any given day and that submitted invoice costs represented actual time worked on tasks specifically tied to PWs on the specified day.  The Applicant also stated that, prior to the firm’s departure during the recovery process (at a point where PWs had not been written and damaged sites were referenced by flood damage site numbers), the Applicant did not know which sites related to specific PWs.  The Applicant asserted that, in many cases, PWs were written after the DAC in question was incurred, and the Applicant later added PW numbers in place of flood damage site numbers on the firm’s summary invoice.  As to the expense costs, the Applicant asserted that firm travel expenses “were allocated to all work performed, whether eligible or ineligible, based upon total hours incurred,” and that allocating the total amount of expenses across all sites was a reasonable approach, given that such expenses would be expected from an out-of-state contractor.

The Grantee transmitted the first appeal to FEMA Region V in a letter dated June 12, 2013.  The Grantee stated that it supported “only the Direct Administrative Costs as applied to each specific project worksheet” and that it had stressed to the consulting firm that it review every project worksheet at closeout and that eligible reimbursable costs (including DAC) must be documented specifically to each PW.

On September 3, 2013, while reviewing the first appeal, FEMA Region V submitted a request for information (RFI) to the Grantee seeking (1) information that clearly correlated claimed DAC and specific PWs, and (2) the total dollar amount in dispute.  The Applicant responded to the RFI on September 20, 2013, providing a revised claimed DAC invoice summary that eliminated costs associated with ineligible flood damage sites and identified specific PWs for each listed task, and stating that it was seeking $103,097.07 in denied claimed DAC across 113 PWs.

On December 20, 2013, the Regional Administrator (RA) issued a response denying the first appeal.  As to costs deemed ineligible because they were divided evenly across multiple PWs, the RA reiterated that the Applicant’s claimed DAC were ineligible because they were not incurred for specific PWs.  The RA noted that the firm’s summary invoice divided hours and costs worked on a single task for multiple PWs evenly across multiple PWs.  As an example, it was noted that on the original summary invoice, the firm indicated that it spent .02 hours on a task described as “City project listing update” for 225 PWs.  The RA reasonably concluded that the firm simply divided the total time spent on “City project listing update” across those PWs, rather than actually spending exactly 1.2 minutes on that task on each of the 225 PWs.  According to the Regional Administrator, the even division across multiple PWs indicated that an actual cost on each PW was unknown.

The RA also reiterated that for claimed DAC related to a specific flood-damaged site that later was subject to multiple PWs, tasks associated with the site could not be correlated to any one PW.  As an example, the RA pointed to the Applicant’s zoo: the zoo was designated as one flood damage site, but it sustained damage and was the subject of recovery work on multiple elements, such as bridges, animal enclosures, buildings, roads, and footpaths.  Zoo-related work was subject to multiple PWs; therefore, entries on the consulting firm invoice summary assigned to the zoo as a single flood damage site could not be tied to any specific PW written to address a specific portion of zoo-related work.  The RA further explained that the revised invoice submitted in response to the RFI simply assigned all zoo-related tasks to a single zoo-related PW (PW 854, addressing repairs to a dry stack retaining wall)—including unrelated tasks associated with animal enclosures and the preparation of improved project requests.  Thus, the RA found the allocation was not done based on DAC actually associated with the PW.

As to travel expenses, the RA explained that general travel expenses were allocated to every task for all PWs in proportion to the hours worked on the task and, therefore, those expenses could not be considered direct costs because they did not pertain to a specific project.  Under FEMA policy, the RA noted that travel and expense tasks related to general support and not tied directly to one specific project are considered indirect costs.  The RA found that FEMA had determined eligible as direct costs those travel expenses in the invoice that were directly related to a specific PW (for example, mileage for driving to a site visit).

Second Appeal

The Applicant submitted a second appeal in a letter dated March 6, 2014.  The Applicant stresses that PWs were prepared after the consulting firm had stopped its work and asserts that there is no guidance governing standards for documentation of costs where the documentation relates to activities prior to the formulation of PWs.

Specifically as to indirect costs, the Applicant asserts that references to DAC being related to a “specific project” in the FEMA policy governing management costs and DAC should not be conflated with references to a specific “PW.”  The Applicant argues that invoices and supporting documentation it provided offer enough information to track costs to single sites and that its costs were directly charged to a specific site or project.  The Applicant asserts that the claimed DAC has been properly documented, can be tracked to specific projects, and that the preparation of PWs after the work had been completed “created an appearance, not a reality, that some of its charges were indirect.”

As to travel expenses, the Applicant points to FEMA policy stating that travel and per diem costs are eligible as direct costs if they can be “attributed” to individual projects.  The Applicant asserts that, under accounting principles, “attribution is a function of allocation,” and that it reasonably allocated its travel costs to individual projects.  The Applicant states it “first allocates all expenses that can be directly allocated to a particular job to that job,” and remaining expenses are attributed based on time charged to all jobs within an expense reporting period.” Expenses for each job are allocated “based on the relative portion of direct and indirect hours incurred by all individuals providing services for that job.”

The Grantee transmitted the second appeal to the FEMA Region V RA in a letter dated March 27, 2014.  The Grantee again supports reimbursement of DAC applicable to each specific PW.

Discussion

Under the Public Assistance (PA) program, applicants for assistance have the opportunity to recover costs they incur to manage and administer PA grants they receive.  Under FEMA regulations, “indirect costs” are those a grantee or subgrantee incurs “for a common or joint purpose benefiting more than one cost objective that are not readily assignable to the cost objectives specifically benefited.”[1]  The regulations provide that “management costs” are “any indirect costs, administrative expenses, and any other expenses not directly chargeable to a specific project that are reasonably incurred by a grantee or subgrantee in administering and managing a PA or HMGP grant award.”[2]   Under the management cost regulations, “[a]ctivities and costs that can be directly charged to a project with proper documentation are not eligible for funding under this part.”[3]

However, FEMA policy affords PA applicants the ability to obtain reimbursement for such expenses as “Direct Administrative Costs,”—“costs incurred by the grantee or subgrantee that can be identified separately and assigned to a specific project.”[4] Under Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, DAC “include costs that can be tracked, charged, and accounted for directly to a specific project, such as staff time to complete field inspection and preparation of a PW.”[5]  DAC “are limited to actual reasonable costs incurred for a specific project” and are “considered project costs.”[6]  The policy notes that DAC ‘are cost-shared at the prevailing cost-share rate for the [major disaster] or [emergency] declaration” because “they are part of a specific project.”[7]  When an applicant seeks reimbursement for DAC, the policy instructs that specified text be added to the appropriate PW’s scope of work and that a certain line item cost code be included in the PW’s project cost.[8]  Final payment of DAC for large projects is based on actual costs incurred, while final payment of DAC on small projects is paid upon approval.[9]

Additional FEMA Recovery Directorate guidance on implementing DAP 9525.9, provides a non-exhaustive list of PA administrative activities.[10]  This guidance notes that all the listed activities are eligible for reimbursement with section 324 Management Cost funding, and those marked as “Direct” may be “directly charged to projects [as DAC] if they can be fully documented as such.”[11]  Descriptions of all of the activities marked as “Direct” note that they must pertain to “one specific project.”[12]

Applying this regulatory and policy framework to the claimed DAC sought by the Applicant here, it is clear that these costs cannot be reimbursed as direct costs.  As mentioned, in order for direct costs to be eligible for reimbursement as DAC, the costs must be able to be identified and assigned to a specific project. If the costs cannot be assigned to a specific project, they will be considered indirect and eligible as management costs, subject to the Grantee’s approach under its state administrative plan for passing through such costs to applicants.

In determining what requested DAC was eligible for reimbursement, FEMA regional personnel performed a detailed review of the consulting firm’s invoice provided by the Applicant.  As noted in the first appeal response, the invoice revealed numerous costs reflecting work performed on multiple sites or single sites subject to multiple PWs and, thus, those costs could not be “identified separately and assigned to a specific project” and were not costs “incurred for a specific project” as required by DAP 9525.9.  FEMA personnel reviewed each task entry and removed those reflecting indirect costs, including costs for the same task allocated in equal fractions of time across multiple sites.  For example, the invoice included approximately five and a half hours of a task described as “Proj List Devel – Data Collect & Dissemination” with the accompanying comment, “Accumulation of data for specific sites from utility data for submission of data to FEMA.”  These hours were divided across 129 sites, with .04 of the task’s hours assigned to each site.  On second appeal, the invoice summary provided by the Applicant contains the same deficiencies.  For example, under the same task, “Proj List Devel – Data Collect & Dissemination,” with the accompanying comment, “Extracting data for each site from city documents,” are allocated .10 hours across numerous PWs.  Because this work was not performed for any specific PW, the associated costs are indirect and not reimbursable as DAC.  The RA correctly determined that such costs could not be reimbursed as DAC.

As to the requested travel expenses, FEMA reimbursed those expenses that could be tied to specific projects, such as site-visit expenses.  Expenses allocated to every task for all PWs in proportion to the hours worked on the task are not eligible as DAC.  Under FEMA policy, travel and related expenses are eligible as DAC during the project listing development, project formulation, PW processing, and PW management and closeout phases if they “relate to one specific project for any of the direct administrative activities” in the respective phase.[13]  Travel expenses “related to general support and not tied directly to one specific project,” however, are not eligible as DAC and, instead, may be eligible as indirect costs.[14]  The Applicant’s description of how it submitted travel costs—allocating non-direct expenses for an individual “charged to all jobs” based on hours incurred all individuals providing the same services—clearly demonstrates that these expenses are not eligible as DAC.

As to the Applicant’s comments regarding after-the fact preparation of PWs, there is no merit to the argument that a PW cannot be prepared after a project is completed.  DAP 9525.9 recognizes that a project may be completed when a PW is written and that eligible DAC can be included in the PW.[15]  The Applicant’s assertion that DAP9525.9 does not tie DAC eligibility to specific PWs also is incorrect.  To the contrary, DAP9525.9, stresses that, in order to be eligible as DAC, requested costs must be chargeable to specific projects and specific PWs.[16]

Conclusion

To be eligible for reimbursement, claimed DAC must be able to be charged directly to a PW.  Based on FEMA’s review, the $103,097.07 in claimed DAC sought by the Applicant are not charged as such.  Therefore, they constitute indirect costs not eligible for reimbursement as DAC.

[1]  See 44 C.F.R. § 207.2 (2012).

[2]  See id.

[3]  See 44 C.F.R. § 207.6(c) (2012).

[4]  Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs at 2 (Mar. 12, 2008)

[5]  Id. at 6.

[6]  Id.

[7]  Id.; see also Public Assistance Guide, FEMA 322 at 63 (June 2007) (“[D]irect costs of managing specific projects that are completed using Public Assistance funds … are eligible as part of the grant for each project, as long as they can be specifically identified and justified as necessary to do the work.”).

[8]  See DAP 9525.9, at 7.

[9]  Id. at 7.

[10] See Memorandum from Assistant Administrator, Disaster Assistance Directorate, to Regional Administrators, Acting Regional Administrators, Transitional Recovery Office Directors, Federal Coordinating Officers, and Disaster Assistance Division Directors (Sept. 8, 2009) [hereinafter Memorandum from Assistant Administrator].

[11] Id.

[12] See attachment to Memorandum from Assistant Administrator, Public Assistance Program Indirect and Direct Administrative Activity List.

[13] See attachment to Memorandum from Assistant Administrator, Public Assistance Program Indirect and Direct Administrative Activity List.

[14]  Id.

[15] See DAP 9525.9, Section 324 Management Costs and Direct Administrative Costs at 6.  (“If a project is completed when the PW is prepared, actual direct administrative costs … will be included in the PW for the subgrantee”).

[16]  See, e.g., DAP 9525.9, Section 324 Management Costs and Direct Administrative Costs at 6 (providing as an example that costs for preparation of a PW are eligible DAC); id. at 7 (instructing what language to include in a PW when an applicant seeks DAC reimbursement).

 

2 Jun 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
City of Pierre
Disaster Number: 
1984-DR-SD
DSR: 
2432
Date Signed: 
Wednesday, May 27, 2015
PA ID: 
065-49600-00
Summary/Brief: 

Conclusion:  The damage to the Applicant’s three sewer lines and a manhole was caused by the disaster and the work performed by the Applicant’s contractor under the original contract and a subsequent change order was necessary to accomplish the needed repairs.  The Applicant’s procurement of the original contract appropriately utilized small purchase procedures, as the total cost of the contract was less than $150,000.  The Applicant’s use of noncompetitive procedures to award a sole-source change order to address additional damage discovered during the repair work was appropriate, as it was infeasible to have conducted a competitive procurement and the public emergency would not permit delay resulting from competitive solicitation.  The Applicant did not, however, perform an appropriate cost analysis of the change order, which is a violation of the procurement standards.

Summary Paragraph

In 2011, significant flooding caused erosion and degradation of the sanitary sewer system operated by the City of Pierre (Applicant), resulting in a sinkhole stretching along a sewer line from a manhole.  The Applicant received two bids from contractors to perform permanent repairs to the sinkhole and remove and replace the sewer line.  The city awarded the contract to the lower bidder.  During excavation and repair, additional damage was discovered on two additional sewer lines and the manhole.  On November 29, 2011, a change order was issued for the additional repair work, totaling $237,244.86.  FEMA approved Project Worksheet (PW) 2432 for $90,775.33, covering the costs of temporary repair work, direct administrative costs, the initial contract for the permanent repair of the sewer line (which was $86,000.00), and a contract estimate for curb and gutter work.  PW 2432 did not include the costs of work performed under the $237,244.86 change order to the contract because, FEMA determined, there was a “lack of specific documentation regarding costs and quantities” and “proof that the damages were flood-related.”  The Applicant appealed this decision, and the Acting Regional Administrator approved the appeal in part determining that neither  the initial contract procurement nor the change order comported with applicable procurement regulations.  On second appeal, the Applicant argues that its actions were justified under applicable procurement laws, and that the entire scope of work is eligible for PA funding.

Authorities

  • 44 C.F.R. § 206.223(a)
  • 44 C.F.R. §§ 13.36 and 13.43
  • 44 C.F.R. §207.6

Headnotes

  • Under 44 C.F.R. § 206.223(a), for any item of work to be eligible for financial assistance, it must, among other things, be required as a result of the emergency or major disaster event.
  • Under 44 C.F.R. Part 13, local government subgrantees must follow procurement procedures that reflect applicable state and local laws, provided that they also conform to applicable federal law and the standards set forth in 44 C.F.R. § 13.36.  Generally, procurements must be undertaken in a way that provides for full and open competition.  Federal regulations provide for four types of procurement methods: by small purchase procedures, by sealed bids, by competitive proposals, and by noncompetitive proposals (when warranted).
    • Small purchase procedures was an appropriate method of procurement for the original procurement.  The contract was awarded for less than the simplified acquisition threshold of $150,000, and the Applicant solicited bids from an adequate number of sources, ultimately awarding the contract to the lower of the two bids received.  The change to the scope of work increasing the cost of the contract above the simplified acquisition threshold was not foreseeable at the time of award.
    • Procurement by noncompetitive proposals was an appropriate method of procurement for the change order.  Repairing the sewer lines without undue further delay was critical, given impending winter temperatures and continuing sewer backups in the surrounding downtown district.  It was, therefore, infeasible to have conducted a competitive procurement and the public emergency would not permit delay resulting from competitive solicitation.
    • The Applicant did not, however, complete a cost analysis as required under a noncompetitive procurement. 
  • Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, Section VII(D)(1).

Direct Administrative Costs  include costs that can be tracked, charged and accounted for directly to a specific project, such as staff time to complete field inspection and preparation of a PW. Direct costs are limited to actual reasonable costs incurred for a specific project.  The Applicant provided a list of six staff members it asserts engaged in administrative activities pertaining to PW 2432, but failed to include supporting documentation, such as timesheets, establishing that the work was actually performed.

Letter: 

May 27, 2015

Kristi Turman
Director
South Dakota Office of Emergency Management
118 West Capitol Avenue
Pierre, South Dakota 57501

Re: Second Appeal—City of Pierre, Sanitary Sewer Line Repair, FEMA-1984-DR-SD, Project Worksheet 2432

Dear Ms. Turman:

This is in response to a letter from your office dated October 25, 2013, which transmitted the referenced second appeal on behalf of the City of Pierre (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency (FEMA) denial of its request for certain costs associated with sewer line repairs caused by heavy flooding.

As explained in the enclosed analysis, FEMA is partially approving the Applicant’s second appeal. The damage to the sewer lines and manhole was caused by the disaster event, and the work as described in the change order was necessary to accomplish the needed repairs.  The Applicant complied with the method of procurement requirements under 44 C.F.R. § 13.36(d) for both the original procurement and the change order, but failed to comply with the cost analysis requirement for the change order required by 44 C.F.R. § 13.36(f).  Notwithstanding this noncompliance, FEMA will not take enforcement action by reducing the otherwise eligible costs incurred by the Applicant for eligible work.  FEMA will, therefore, increase the amount awarded under PW 2432 by an additional $213,570.86 for costs incurred under the change order, $3,397.10 for the manhole, $2,359.85 for curb and gutter repair and replacement, and $5,666.05 for direct administrative costs related to this project.

Please inform the Applicant of my decision.  This determination constitutes the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

cc: Sharon Loper
     Acting Regional Administrator
     FEMA Region VIII

Analysis: 

Background

In the spring and summer of 2011, warm temperatures caused significant runoff and flooding in the state of South Dakota following a winter with above-normal snowfall.  On May 13, 2011, the President declared a major disaster for the state (FEMA-1984-DR-SD), with an incident period of March 11 to July 22, 2011.

The flooding caused erosion and degradation of the sanitary sewer system operated by the City of Pierre (Applicant).  The sewer system delivers sewage to the Applicant’s wastewater treatment plant.  A 72-foot long section of a 10-inch diameter clay sanitary sewer pipe on Missouri Avenue failed, creating a sinkhole that began developing during the disaster incident period.  The sinkhole stretched due east along the sewer line (the “East Line” to Pierre Street) from a manhole that serves as a connection point between additional sewer lines and a lift station.  The Applicant used contract services, force account labor, and force account equipment to address resulting sewer backups, bypass pumping, and perform temporary repairs to the sinkhole.

The Applicant received two bids from contractors to perform permanent repairs to the sinkhole and remove and replace the sewer line, one bid for $86,000.00 and another for $160,400.00.  On October 25, 2011, the Applicant awarded a contract to the lower bidder, Morris, Inc. (the “Contractor”).  The contract included work immediately adjacent to the manhole and included removal of a minimum of the top half of the impacted manhole.  Under the contract, the Contractor was responsible for providing all materials, except for surface gravel, and the Applicant was responsible for replacing asphalt surface material, closing the water line valve, and bypass pumping.

On October 26, 2011, the Applicant issued a notice to proceed to the Contractor.  During excavation and repair and after the pipe was exposed, additional damage was discovered on two additional sewer lines and the manhole.  On November 29, 2011, a change order was issued for work to include: (1) removal of the manhole and placement of a concrete base under the replacement manhole, (2) excavation and removal of a damaged 12-inch line to the lift station to the north (the “North Line” to lift station), (3) excavation and removal of a damaged 10-inch line flowing into the manhole from the west and installation of a new line (the “West Line” to Fort Street), and (4) installation of sheet piling to protect structures and laborers.  The change order amounted to $237,244.86.

On April 13, 2012, FEMA obligated $90,775.33 in Project Worksheet (PW) 2432, covering the contract and force account work and materials associated with the temporary repair of the sinkhole ($3,484.60), direct administrative costs (DAC) ($94.73), and the initial contract for the permanent repair of the sewer line ($86,000.00), plus a contract estimate for curb and gutter work ($1,196.00).[1]  PW 2432 did not include the costs of work performed under the $237,244.86 change order to the contract because, FEMA determined, there was a “lack of specific documentation regarding costs and quantities” and “proof that the damages were flood-related.”  According to FEMA, without documentation supporting the $237,244.86 lump-sum change order, it was not possible to determine the reasonableness of those costs.  FEMA’s PW notation also stated that the additional damage was discovered after the initial site inspection and had not been inspected by FEMA.

First Appeal

The Applicant submitted a first appeal to the South Dakota Department of Public Safety (Grantee) in a letter dated May 18, 2012, seeking reimbursement of the $237,244.86 change order amount.  The Grantee forwarded the letter to FEMA Region VIII in a letter dated July 3, 2012, after requesting and obtaining additional information from the Applicant.  The Applicant asserted that the Missouri Avenue manhole displayed obvious displacement following the disaster, with the displacement resulting in the shearing of the three sewer lines entering the manhole.  Displaced manholes and sinkholes arose throughout the city, the Applicant explained, with other PWs written to document the costs of their repair.  The Applicant stated that the failure became visible around the manhole before excavation began but that the specific lines affected by the manhole’s displacement were not known until a visual inspection after excavation.  The damage to the additional lines and manhole became apparent only after the Contractor exposed the structure, the Applicant asserted.  Thus, rather than being a “singular repair,” the applicant explained, the repair “became a three[-]phase project involving three excavations and repairs.”  According to the Applicant, the Contractor justified the increased costs of $237,244.86, and the Applicant approved the change order in that amount in accordance with applicable procurement procedures.  The Applicant noted that the deep repair, water and materials infiltration, nearby utilities, need for sheet piling, and other factors made the project complex and costly.

On July 3, 2013, after issuing multiple requests for information and receiving the requested information from the Applicant, the Acting Regional Administrator (RA) issued a decision partially granting the appeal.  Regarding whether the damage to the system was caused by the disaster, the Acting RA stated that, without knowing the condition of the manhole immediately prior to the appearance of the sinkhole, it was not possible to determine how the damage to the system occurred.  However, the Acting RA accepted the Applicant’s assertions that the system was intact prior to the disaster event and that the damage to the sewer lines was caused by the disaster but rejected the notion that the manhole itself was damaged, stating that the Applicant merely asserted that a new manhole was placed to “ensure a proper seal.”  Regarding eligible work, the Acting RA concluded that the scope of work under both the original contract and the change order included increased and duplicative work and that eligible work included (1) excavation and replacement of 51.9 feet of 10-inch East Line lateral from the manhole toward Pierre Street, along with pea gravel bedding; (2) excavation and replacement of 12 feet of 10-inch West Line lateral from the manhole toward Fort Street, along with pea gravel bedding; (3) excavation and replacement of 20 feet of 12-inch North Line lateral from the manhole toward the lift station, along with pea gravel bedding; and (4) stabilization of the manhole location with gravel and placement of a new concrete base.

The Acting RA also found that the Applicant improperly procured both the original contract and the change order.  As to the original contract, the Acting RA stated that the Applicant failed to publicly advertise its solicitation for bids and, instead, merely solicited invitations to bid from local, capable contractors.  The Acting RA also stated that the need for additional work was not discovered until after the contract completion date of November 21, 2011.  As to the change order, the Acting RA stated that the Applicant failed to perform a necessary cost analysis and approved the change on a lump-sum basis, a change that increased the contract price by 276 percent.  The Acting RA concluded that this increase could not be considered reasonable.

The Acting RA sought to establish reasonable costs based on FEMA’s Cost Estimating Format (CEF).  Applying the CEF the Acting RA, estimated total eligible costs for the work completed amounted to $114,449.33--$23,674.00 above the obligated amount.

Finally, the Acting RA concluded that no documentation was provided supporting $1,241.00 in claimed Direct Administrative Costs, $2,096.85 in force account labor costs, and $897.00 in force account equipment costs.

The Acting RA obligated an additional $23,674.00, representing additional reasonable costs arrived at using the CEF and based on what he determined to be eligible work. 

Second Appeal

The Applicant submitted a second appeal in a letter dated August 28, 2013.  The Applicant argues that, given the circumstances it faced, its procurement of both the original contract and the change order complied with applicable procurement laws and procedures.  As to the original contract, the Applicant noted that, at the time of the repair, the Missouri River flooding resulted in significantly elevated underground water levels, leaving its sanitary sewer line near the river under 20 feet of water, negatively affecting manholes and the lift station.  According to the Applicant, federal and state procurement laws allow for emergency procurement when a threat exists to public health, welfare, or safety, or when a public emergency requires it.  The Applicant asserts that sewer line breaks and resulting sewage backup and bypass procedures constituted such a threat and emergency.  Moreover, the Applicant states, under federal procurement regulations, small purchases may be accomplished by obtaining several price quotes from different sources; three contractors attended the bid opening and reviewed the original contract scope of work, the Applicant explained, and two submitted bids.  The Applicant noted that it accepted the lower bid of $86,000.00, under the small purchase threshold.

Regarding the change order procurement, the Applicant cites a variety of factors it asserts justified its decision under state law, federal law, and FEMA policy to proceed with additional repairs to the newly discovered damage without competing the work.  The Applicant points out that the breaks in the three lines affected the main sewer line, which serves more than half of the city’s population.  The Applicant notes that above-normal precipitation continued during the repairs and that, given the extended length of the project, repair work—which involved exposed utilities and structures—would take place during below-freezing temperatures as winter set in.  The freezing temperatures would affect not only the repairs but also bypass operations, the Applicant argues.  In addition, the Applicant notes, the Contractor had already installed sheetpiling, which was actively protecting the site, and was the sole source of sheetpiling in the area.  The Applicant also notes the numerous other sewer repairs were required following the disaster event and asserts that utility repairs and levee removals in progress in dozens of counties across South Dakota and in the surrounding state affected contractor availability.  Thus, the Applicant argues, the Contractor, already in place, was the only practicable source to continue the repair work.

The Applicant also argues that the costs of the project, including the additional repairs under the change order (totaling $323,244.86), were reasonable and in line with other sewer repair work at the time.  The Applicant states that the project’s total cost per day, $10,774.83, was approximately $2,500.00 per day less than the per-day average sewer repair bid that the Applicant reviewed in 2011 following the disaster.

The Applicant asserts that total project costs (including costs captured on PW 2425) amount to $370,612.96.  After taking into account funding provided thus far—the original $90,775.33 obligated in PW 2432; the $23,674.00 in additional costs awarded by the RA; and $7,095.00 for asphalt repairs associated with the site captured in PW 2425—the Applicant requests an additional $249,163.36 for the repairs.[2]  The Applicant also seeks an additional $5,666.05 in DAC:

 

Total Project Cost (Requested by Applicant)

FEMA Eligible after 1st Appeal

Difference

PW 2432

 

 

 

Work Completed

3,484.60

3,484.60

0.00

Contract Work

86,000.00

86,000.00

0.00

Curb and Gutter

3,555.85

1,196.00

2,359.85

Additional Costs:

 

 

 

Contract (first appeal)

237,244.86

23,674.00

213,570.86

Manhole

3,397.10

 

3,397.10

DAC

 

94.73

 

Sub-total PW 2432

333,682.41

114,449.33

219,233.08

 

 

 

 

Lift station (other PW)

8,697.64

 

8,697.64

Asphalt repair (other PW)

28,232.91

7,095.81

21,137.10

Sub-total (includes other PW)

370,612.96

121,545.14

249,067.822

 

 

 

 

DAC (only PW 2432)

5,666.05

 

5,666.05

 

 

 

 

Total (PW 2432)

339,348.46

114,449.33

224,899.13

Total (includes other PWs)

376,279.01

121,545.14

254,733.87

The Grantee transmitted the second appeal to the FEMA Region VIII Acting RA in a letter dated October 25, 2013.  Applicant representatives provided a presentation to FEMA reiterating and supplementing points raised on second appeal on January 27, 2014.

Discussion

Damage and Scope of Work

Section 406 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (“Stafford Act”) authorizes FEMA to provide grant assistance to states, local governments, and certain non-profit organizations for the repair and replacement of facilities damaged or destroyed by a major disaster.[3]  FEMA administratively categorizes this work as “permanent work,” Public Assistance Categories C through G.  To be eligible for Public Assistance, an item of work must be required as a direct result of the designated event under a major disaster declaration.[4]  Work to repair damage that results from a cause other than the designated event outside the incident period (such as a pre- or post-disaster rain, wind, flooding, storms, or normal weather conditions) is not eligible, and it is an applicant’s responsibility to show that the damage is disaster-related.

On first appeal the RA concluded that eligible work included (1) excavation and replacement of 51.9 feet of 10-inch East Line lateral from the manhole toward Pierre Street, along with pea gravel bedding; (2) excavation and replacement of 12 feet of 10-inch West Line lateral from the manhole toward Fort Street, along with pea gravel bedding; (3) excavation and replacement of 20 feet of 12-inch North Line lateral from the manhole toward the lift station, along with pea gravel bedding; and (4) stabilization of the manhole location with gravel and placement of a new concrete base. The RA rejected the Applicant’s assertions that the manhole was damaged by the disaster because the Applicant did not provide supporting document. After a review of the Applicant’s appeal submissions, FEMA concludes that the Applicant has provided documentation—in the form of maps, photographs, reports, charts, e-mail communications, and other materials—sufficiently demonstrating that the damage to the three sewer lines and manhole was caused by the disaster event and that all of the repair work as described in the change order was necessary.

Procurement

There are three procurement-related issues presented under the second appeal: (1) whether the method of procurement used by the applicant for the original procurement complied with 44 C.F.R. § 13.36(d); (2) whether the procurement method followed by the applicant for the change order complied with 44 C.F.R. § 13.36(d); and (3) whether the applicant conducted the proper cost or price analysis for the change order.  An overview of procurement standards applicable to the issues presented is provided below, followed by an analysis of each issue.

        Overview of the Applicable Procurement Standards at 44 C.F.R. § 13.36

Financial assistance provided under the Public Assistance Grant Program can be used for the cost of eligible work completed through contracts procured by a local government applicant.[5]  As a condition of receiving financial assistance for these contract costs, a local government’s procurement and resulting contract must comply with the standards set forth at 44 C.F.R. § 13.36.  This regulation requires a local government to use its own procurement procedures which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal law and the federal procurement standards set forth at 44 C.F.R. § 13.36(b)-(i).  It is important to recognize that a procurement may, in some circumstances, comply with state and local law and regulations, but not meet the minimum federal procurement standards—such a procurement would be noncompliant with 44 C.F.R. § 13.36.

These federal procurement standards require local government subgrantees to, among other things, conduct all procurement transactions in a manner providing full and open competition consistent with the standards at 44 C.F.R. § 13.36.[6]   Full and open competition, although not defined by the regulation, generally means that a complete requirement is publicly solicited and all responsible sources are permitted to compete.[7]

The regulation also sets forth the three competitive methods of procurement to be followed by a local government, which include procurement by small purchase procedures, sealed bidding, and competitive proposals.[8]  First, small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the simplified acquisition threshold, which was $150,000 at the time of major disaster FEMA-1984-DR.[9]  If small purchase procedures are used, a local government must obtain price or rate quotations from an adequate number of qualified sources.[10]  Second, under sealed bidding, a local government publicly solicits bids and a firm-fixed price contract is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price.[11]  The sealed bid method is the preferred method for procuring construction if certain conditions apply.[12]  Third, the technique of competitive proposals is normally conducted with more than one source submitting an offer, and either a fixed-price or cost-reimbursement contract is awarded.[13]  This method is generally used when conditions are not appropriate for the use of sealed bids.[14]

In addition to the three competitive methods, the regulation does permit a local government to utilize the procurement through noncompetitive proposal method.  A local government can only use this method, however, in cases where the award of a contract is infeasible under small purchase procedures, sealed bidding, or competitive proposals and where one of following four alternative conditions applies: (1) the item is available only from a single source; (2) public exigency or emergency for the requirement will not permit delay resulting from competitive solicitation; (3) the awarding agency authorizes noncompetitive proposals; or (4) after solicitation of a number of sources, competition is determined inadequate.[15]

The regulation at 44 C.F.R. § 13.36(f) requires a local government to perform a price or cost analysis in connection with every procurement action, including contract modifications.  A cost analysis involves the verification of proposed cost data, projections of that data, and evaluation of the specific elements of costs and profits.[16]  A cost analysis is required for sole source procurements, including contract modifications or change orders, unless price reasonableness can be established on the basis of a catalog or market price of a commercial product sold in substantial quantities to general public or based on prices set by law or regulation.[17]  A price analysis will be used in all other instances to determine the reasonableness of the proposed contract price.[18]

Once a contract is awarded, a local government may need to make changes to that contract to react to newly encountered circumstances, fix inaccurate or defective specifications, or modify the work to ensure the contract meets the local government’s requirements.  A contract “change” is any addition, subtraction, or modification of work under a contract during contract performance.[19]  Notwithstanding the need to make appropriate contract changes, a local government may not make a “cardinal change” to a contract so as to circumvent the requirements of 44 C.F.R. § 13.36 for full and open competition.  A cardinal change is a significant change in contract work (property or services) that causes a major deviation from the original purpose of the work or the intended method of achievement, or causes a revision of contract work so extensive, significant, or cumulative that, in effect, the contractor is required to perform very different work from that described in the original contract.[20]  A modification that comprises a cardinal change constitutes a sole source award, and FEMA evaluates such a modification to determine if the conditions precedent for a noncompetitive procurement at 44 C.F.R. § 13.36(d)(4) have been met. 

Procurement of the Original Contract

The Acting Regional Administrator determined in the first appeal that the Applicant failed to adhere to the procedural requirements of sealed bidding at 44 C.F.R. § 13.36(d)(2) when procuring the original contract for $86,000.  Specifically, the Applicant failed to publicly advertise its invitation for bids and, instead, only solicited invitations to bid from local, capable contractors.[21]  In the second appeal, the Applicant has asserted, among other things, that the contract was for less than the simplified acquisition threshold, such that it could avail itself of the procurement by small purchase procedures method of procurement under 44 C.F.R. § 13.36(d)(2).[22]

The regulation at 44 C.F.R. § 13.36(d)(1) provides that small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the simplified acquisition threshold, which was $150,000 at the time of major disaster FEMA-1984-DR.[23]  A local government may not break out a larger procurement merely to gain advantage of small purchase procedures.  Similarly, a local government may not limit the size of a procurement to only a portion of a known requirement in order to gain advantage of small purchase procedures and then, to fulfill the entire requirement, later issue follow-on change orders that bring the procurement above the simplified acquisition threshold. 

FEMA has determined that the Applicant was not required to use sealed bidding for the original procurement and that it was appropriate for the Applicant to have utilized the small purchase procedure method of procurement.  When evaluating whether it was appropriate for a local government to have used small purchase procedures, FEMA will review whether the supplies or services to be acquired were initially estimated to not exceed the simplified acquisition threshold or whether the acquisition did, in fact, exceed the threshold.  In this case, the Applicant acquired services to repair the single sewer line and sinkhole on Missouri Avenue that cost $86,000, which falls below the simplified acquisition threshold.  The documentation provided by the Applicant also indicates that the additional damage discovered after work began on this contract was unknown at the time of the original procurement, and that the Applicant developed the scope for the original procurement based on its inspection of the site and judgment as to the work necessary to repair disaster damage.  There is no indication that the Applicant improperly limited a known, larger requirement so as to avail itself of small purchase procedures.  

In addition to demonstrating that the acquisition falls below the simplified acquisition threshold, when small purchase procedures are used, a local government must obtain price or rate quotations from an adequate number of qualified sources.[24]  FEMA has generally interpreted an “adequate number” of sources under 44 C.F.R. § 13.36(d)(1) to be at least three, although what is adequate will depend upon the facts and circumstances surrounding a particular procurement. [25]  The Applicant asserted that it solicited numerous local contractors to submit quotes for the project, with two contractors responding and submitting bids.  Although only receiving two bids, the facts and circumstances indicate that it was a reasonable decision not to delay on moving forward with the procurement by going back out and seeking one additional bid from those contractors already solicited or from additional contractors not previously solicited.  The Applicant asserted that the water elevation line was above the sewer line at the time the original contract was written.  The water, which had a significant and negative effect on the sanitary sewers, manholes, and lift station, made time of the essence to effectuate the repairs and address threats to public health caused by the existing sewer leekage and potential future leekage.[26]  FEMA has, under these specific facts and circumstances, determined that the Applicant obtained price or rate quotations from an adequate number of qualified sources for the original procurement.

Procurement Method Used for the Change Order

The Acting Regional Administrator determined in the first appeal that the Applicant failed to adhere to the requirements of 44 C.F.R. § 13.36 when it procured the change order to the original contract, making specific reference to the failure of the Applicant to perform a cost analysis pursuant to 44 C.F.R. § 13.36(f).  The first appeal response and analysis, however, did not specifically analyze the method of procurement used to obtain the change order.  Notwithstanding, it is implied from the first appeal decision that the Acting Regional Administrator found issue with the Applicant’s noncompetitive method of procuring the change order (as is evidenced by the Applicant and Grantee specifically addressing this issue on second appeal), and FEMA will address this issue as part of the second appeal.  The issue of a cost analysis is addressed in the following subsection.

A contract “change” is any addition, subtraction, or modification of work under a contract during contract performance.[27]  The first step in analyzing a contract change is to determine whether the change is within the scope of the original procurement.  If it is, then the change order is simply part of the original procurement, which means that such a change would be permissible if the Applicant had complied with all relevant procurement standards during the original procurement.  FEMA treats a cardinal change, on the other hand, quite differently.  A cardinal change is a significant change in contract work (property or services) that causes a major deviation from the original purpose of the work or the intended method of achievement, or causes a revision of contract work so extensive, significant, or cumulative that, in effect, the contractor is required to perform very different work from that described in the original contract.[28]  In effect a cardinal change creates a new procurement action that must meet all relevant procurement standards.  Cardinal changes cannot be identified by assigning a specific percentage, dollar value, number of changes, or other objective measure that would apply in all cases.   

FEMA has determined that the change order at issue comprised a cardinal change to the original contract based on the significant increase to the amount and type of repair work and total cost.  The scope of work under the original contract included excavation and repair of the 10-inch line to the east of the manhole and removal and reset of a minimum of the top half of the manhole.  The Applicant explained that the depth of the repair work was significantly increased from 16 to 20 feet in the change order and prompted a great deal of additional work, including the excavation and replacement of 12 feet of line west of the manhole, excavation and replacement of 16 feet of line to the north, and placement of a concrete pad beneath the new manhole.  The cost of this work increased the costs of the contract by $237,244.86, which is an almost 300% increase to the original fixed-price contract for $86,000.

A contract change that comprises a cardinal change constitutes a sole source award, and FEMA evaluates such a modification to determine if the conditions precedent for a noncompetitive procurement at 44 C.F.R. § 13.36(d)(4) have been met.  This regulation does permit a local government to utilize the procurement through noncompetitive proposal method, but only when two conditions precedent are met.  The first condition is that the award of contract is infeasible under small purchase procedures, sealed bidding, or competitive proposals, and the second condition precedent is that one of following four alternative conditions apply: (1) the item is available only from a single source; (2) the public exigency or emergency for the requirement will not permit delay resulting from competitive solicitation; (3) the awarding agency authorizes noncompetitive proposals; or (4) after solicitation of a number of sources, competition is determined inadequate.  A Public Assistance applicant’s failure to plan does not provide sufficient justification for procurement by noncompetitive proposals or otherwise conducting a procurement through less than full and open competition. 

The regulation does not define the term “infeasible,” but FEMA generally defines the term as not feasible, not practicable, or not capable of being done, effected, or accomplished.[29]  Whether or not a form of competitive procurement is feasible includes an analysis of the facts and circumstances of a particular procurement and is often intertwined with the analysis of the second condition precedent.  The Applicant did not provide any information indicating how long it would have taken to have performed a competitive procurement as part of its first or second appeal.  Although no such information was submitted, we understand that the amount of the procurement at issue would have necessitated the Applicant to follow formal advertisement procedures under state law, which requires publication of the advertisement at least ten days before the opening of bids or proposals.[30]  FEMA estimates, in the best case, it would also have taken at least 2 weeks to prepare the solicitation, evaluate the bids or proposals upon receipt, resolve any potential protests, prepare a contract, and submit the contract for approval to the cognizant city official(s).  FEMA has concluded that it was not feasible to complete the procurement—at the very least—for 3 ½ weeks from the time the Applicant defined the scope of the additional damages on or about November 14, which would be December 8.

In addition to the period of infeasibility, the Applicant must also demonstrate that the second condition precedent for using noncompetitive proposals has been met.  The applicable circumstance for discussion in this case is that “the public exigency or emergency for the requirement will not permit delay resulting from competitive solicitation.”  This second condition precedent is crucial for demonstrating that the Applicant had to move forward with procuring the services and could not wait for the competitive process to be completed. 

The term “exigency” is not necessarily the same as the term “emergency,” although the terms are often used interchangeably.  An “exigency” is generally defined as something that is necessary in a particular situation that requires or demands immediate aid or action.[31]  By comparison, the term “emergency” means an unexpected and usually dangerous situation that calls for immediate action.[32]  One of the key distinctions between the terms, accordingly, is that an emergency will typically involve a threat to the public or private property or some other form of dangerous situation, whereas an exigency is not necessarily so limited.[33]

FEMA has determined that the Applicant has demonstrated that the public emergency would not permit delay resulting from competitive solicitation.  Upon defining the additional damage on or about November 14, repairing the sewer lines without delay was critical, given that the Applicant needed to work immediately to address the existing and potential additional sewage leakage resulting from the damage to the sewer lines and manhole that presented the threat of bacteria and viruses escaping to surrounding areas.  The Applicant pointed out that sewer backups continued in the surrounding downtown district and water lines, and that winter temperatures would soon threaten sewage bypass and dewatering operations which would result in the backup of the trunkline, which would have affected homes and businesses.  The forthcoming winter temperature would also preclude the ability to actually effectuate the repairs due to freezing of the ground in which the work took place.  

FEMA has also determined that the Applicant did not create or otherwise contribute to the public emergency because of the Applicant’s failure to plan.  The sinkhole first appeared in June 2011 and the Applicant did not move forward with procuring the original contract to effectuate the permanent repairs until October 2011.  It was during the course of these repairs that the Applicant discovered the additional damage and need for significant, additional work, and it was the impending winter temperatures upon which the Applicant has, in part, relied upon in demonstrating the public emergency that precluded delay from a competitive solicitation.  As such, if there were no adequate justification for the four-month delay in originally procuring the needed services, then the Applicant could not justify a noncompetitive procurement through its failure to make a timely procurement.  

But the Applicant, in this case, has provided adequate justification for the four-month delay.  Specifically, the U.S. Army Corps of Engineers (USACE) was making various discharges from (the Oahe Dam) that impacted the water levels at the area of the damage, and the Applicant waited until the declared end of the event by the USACE before developing the scope of work to make the repairs and moving forward with the procurement.  The declared end of the USACE event occurred on October 17, 2011, and the Applicant then developed a scope of work and completed small purchase procedures by October 25, 2011.

It is important to recognize that the duration of “infeasibility” is not necessarily the same as the period of emergency.  As stated above, in order to use the procurement through noncompetitive proposals, the award of the contract must be “infeasible” under small purchase procedures, sealed bids, or competitive proposals.  And it may be the case that—while it may be infeasible in the short-term to pursue a competitive procurement process in light of an emergency that does not permit delay—it may be possible and practicable for the local government to proceed with a competitive procurement to transition the work into a contract that meets the full and open competition requirements of 44 C.F.R. § 13.36.  Such a situation, however, is not present under the facts presented. 

First, assuming a period of infeasibility that extended 3 weeks from November 14, a contractor would not have begun work until on or about December 8.  The contractor at issue here completed the original repairs on November 16, 2011, and began work on the change order on November 29, 2011, finishing all work by December 23, 2011.  This means that the contractor would have completed a substantial portion of the work under the change order by the time a new contractor would have been able to take over that work.  Second, in light of the fact that the Applicant needed the first contractor to begin work quickly, it would have been impractical for the Applicant to try and develop a precise scope of work for a follow-on contract.  The work at issue, in other words, was not divisible in such a way so as to enable any level or precision in determining what work would be remaining to be done at the time the follow-on contract was awarded.  Third, transition from the initial to the second contractor would have delayed the project even further, as the initial contractor would have had to remove the sheet piling driven into the ground to isolate and protect the area of work before the new contractor would begin work (which would involve putting new sheet piling in).  The removal of the sheet piling may also have caused additional destabilization and damage to the area. 

        Cost Analysis for the Change Order

The Acting Regional Administrator determined in the first appeal that the Applicant failed to perform a cost analysis pursuant to 44 C.F.R. § 13.36(f) for the change order.  The regulation at 44 C.F.R. § 13.36(f) requires a local government to perform cost analysis for sole source procurements, including contract modifications or change orders, unless price reasonableness can be established on the basis of a catalog or market price of a commercial product sold in substantial quantities to the general public or based on prices set by law or regulation.[34]  As pointed out in the previous subsection, the Applicant conducted a sole source procurement when it awarded the change order to its existing contractor, meaning that it needed to perform a cost analysis.  This is also not a situation falling under the exception from performing a cost analysis under 44 C.F.R. § 13.36(f), as (1) the repair of a sewer system is not a commercial product sold in substantial quantities to the general public and (2) the Applicant provided no information establishing that the cost to make the repairs was based on law or regulation.  Therefore, the Applicant was required to conduct a cost analysis.

A cost analysis involves the verification of proposed cost data, projections of that data, and evaluation of the specific elements of costs and profits.[35]  The Applicant did not provide any documentation that it conducted such an analysis at the time of the change order, meaning that the Applicant failed to meet the requirements of the 44 C.F.R. § 13.36(f)(1).  Notwithstanding this noncompliance, FEMA has determined it will exercise its discretion to not take enforcement action under 44 C.F.R. § 13.43.

Eligible Costs

 

FEMA has concluded that all work performed under the change order (including replacement of the manhole) is eligible as permanent work under the Public Assistance Program and, in light of this conclusion, must evaluate the costs for eligibility.  This includes (1) evaluating the costs for that work the Acting Regional Administrator determined was eligible in the first appeal, but for which he only provided a portion of the requested costs; and (2) evaluating the costs of the additional work that FEMA has determined eligible under this second appeal related to the manhole; and (3) other costs.  The Applicant seeks total, additional costs of $249,163.36 under this second appeal as detailed below:

 

  • An additional $213,570.86 for the change order portion of the work (the difference between the $237,244.86 change order amount and the $23,674.00 awarded in the first appeal decision).
  • An additional $3,397.10 for the manhole.
  • An additional $2,359.85 for curb and gutter work ($3,555.85 that the applicant asserts represents actual costs, less the $1,196.00 awarded in PW 2432).
  • An additional $8,697.64 for repair work related to the lift station.
  • An additional $21,137.10 for asphalt repair work. 

 

As it relates to work under the change order, the Public Assistance Guide describes the following ways reasonable costs may be established: historic documentation for similar work, average costs for similar work in the area, published unit costs from national cost estimating databases, FEMA cost codes, and equipment rates.[36] The Applicant has provided bid and award amounts and project duration for twelve other disaster-related sewer repair projects captured in other PWs.  The average per-day contract award amount was $13,278.57, according to the Applicant’s analysis.  In comparison, the initial contract procurement of $86,000.00, with an anticipated project length of seven days, amounted to $12,285.71 per day.  The $237,244.86 change order, for work over 25 days, amounted to $9,489.79 per day.  The entire $323,244.86 project, which took place over 30 days, averaged $10,744.83 per day, more than $2,500.00 less than the overall per-day average for the Applicant’s sewer repair projects.

 

FEMA has also independently evaluated the costs for the work performed under the change order.[37] FEMA’s approach of comparing similar work performed in the same city, around the same time frame for damages caused by the same event to determine reasonableness is appropriate and otherwise consistent with the federal cost principles at 2 C.F.R. part. 225.

 

Based upon the information provided by the Applicant and FEMA’s independent analysis, FEMA has concluded that the additional $213,570.86 for the change order (the $237,244.86 change order amount less the $23,674.00 awarded in the first appeal decision) and additional $3,397.10 for the manhole are eligible for reimbursement.  The Applicant also has provided documentation, in the form of vendor invoices, supporting its claim for an additional $2,359.85 for curb and gutter repair and replacement work, and FEMA is also approving the additional costs for such work.  Furthermore, FEMA is not taking enforcement action based upon the Applicant’s noncompliance with the procurement standard at 44 C.F.R. § 13.43 by reducing these otherwise eligible costs. 

 

The Applicant also seeks an additional $5,666.05 in DAC ($5,784.46 representing actual costs, less $94.73 awarded in PW 2432 and $23.68 awarded in PW 2425).  In support of this request, the Applicant provided a list of six staff members it asserts engaged in administrative activities pertaining to PW 2432.  This documentation consists of a listing of hours worked, brief descriptions of the work, and timesheets establishing that the work was actually performed.  The additional DAC is approved, pending final cost reconciliation at closeout.

 

The requested costs for lift station and asphalt repairs are not germane to this appeal, however, as that work was not included in the scope of work for PW 2432, the only PW at issue in this appeal.  The Applicant must submit a separate appeal or appeals in order to seek reimbursement for claimed costs not associated with PW 2432.  As such, FEMA is denying the requests for additional costs for the lift station and asphalt repairs.

 

Conclusion

 

The damage to the three sewer lines and manhole was caused by the disaster event, and the work as described in the change order was necessary to accomplish the needed repairs.  The Applicant complied with the method of procurement requirements under 44 C.F.R. § 13.36(d) for both the original procurement and the change order, but failed to comply with the cost analysis requirement for the change order required by 44 C.F.R. § 13.36(f).  Notwithstanding this noncompliance, FEMA will exercise its discretion to not take enforcement action by reducing otherwise eligible costs incurred by the Applicant for eligible work.  FEMA will, therefore, increase the amount awarded under PW 2432 by an additional $213,570.86 for costs incurred under the change order, $3,397.10 for the manhole, $2,359.85 for curb and gutter repair and replacement, and $5,666.05 for DAC.  However, FEMA is denying the requests for additional costs for the lift station and asphalt repairs.



[1] PW 2432 did not capture the costs for which the Applicant was responsible; those costs were addressed in a separate PW, PW 2425.

 

[2] Under FEMA’s calculation, the additional requested amount should be $249,067.82 (the Applicant’s asserted total project costs of $370,612.96, less the original $90,775.33 obligated in PW 2432, the $23,674.00 in additional costs awarded by the Regional Administrator, and $7,095.81 for asphalt repairs associated with the site captured in PW 2425).

[3] Robert T. Stafford Disaster Relief and Emergency Assistance Act, Pub. L. No. 93-288, § 406 (1974) (codified as amended at 42 U.S.C. § 5172) [Stafford Act].

[4] Id. (Permanent work authorized by Section 406 of the Stafford Act must be for a facility “damaged or destroyed by a major disaster”); 44 C.F.R. § 206.223(a)(1).

[5] 44 C.F.R. § 13.22.

[6] 44 C.F.R. § 13.36(c).

[7] See Federal Emergency Management Agency, Procurement Disaster Assistance Team, Field Manual – Public Assistance Grantee and Subgrantee Procurement Requirements Under 44 C.F.R. pt. 13 and 2 C.F.R. pt. 215, at 11 (Dec. 2014) [“FEMA PDAT Field Manual”].  See also 48 C.F.R. § 2.101, which defines “full and open competition” with respect to federal acquisitions (“Full and open competition, when used with respect to a contract action, means that all responsible sources are permitted to compete.”).  

[8] 44 C.F.R. § 13.36(d)(1)-(3).

[9] 44 C.F.R. § 13.36(d)(1).  On August 30, 2010, the Civilian Agency Acquisition Council published an updated simplified acquisition threshold of $150,000 in the Federal Register.  75 Fed. Reg. 53,129 (Aug. 30, 2010).  See 41 U.S.C. § 1908; 48 C.F.R. Subpart 2.1 (Definitions).

[10] 44 C.F.R. § 13.36(d)(1).

[11] 44 C.F.R. § 13.36(d)(2).  This regulation sets forth the various procedural requirements that a local government must meet in using the sealed bid method at 44 C.F.R. § 13.36(d)(2)(ii).

[12] 44 C.F.R. § 13.36(d)(2)(i).

[13] 44 C.F.R. § 13.36(d)(3).

[14] Id.  The regulation sets forth the various procedural requirements that a local government must meet in using the competitive proposal method at 44 C.F.R. § 13.36(d)(3)(i)-(v).

[15] 44 C.F.R. § 13.36(d)(4).

[16] 44 C.F.R. § 13.36(d)(4)(ii).

[17] Id.

[18] Id.

[19] See FEMA PDAT Field Manual, pp. 38-39.

[20] See id.

[21] See 44 C.F.R. § 13.36(d)(2)(ii)(A) (“(A) The invitation for bids will be publicly advertised and bids shall be solicited from an adequate number of known suppliers, providing them sufficient time prior to the date set for the opening of bids.”) (emphasis added).

[22] We note that the Applicant relied upon an emergency procurement authority under state law in conducting its original procurement.  S.D. Codified Laws § 5-18A-9.  This law provides that “A purchasing agent may make or authorize others to make an emergency procurement without advertising the procurement if rentals are not practicable and there exists a threat to public health, welfare, or safety or for other urgent and compelling reasons.”  An emergency procurement “shall be made with such competition as is practicable under the circumstances.”  However, even though the Applicant’s original procurement may have complied with state and local law, it must also meet the minimum requirements of the regulation at 44 C.F.R. § 13.36. 

[23] The use of small purchase procedures is not required and, if a local government does use this method, it must be consistent with the local government’s procurement procedures which reflect applicable state and local laws and regulations.  FEMA has accepted the Applicant’s assertion that the procurement method for the original contract complied with its procurement procedures, such that the only issue addressed in this appeal is whether the method of procurement complied with the federal regulation. 

[24] 44 C.F.R. § 13.36(d)(1).

[25] FEMA Recovery Fact Sheet No. 9580.212, Public Assistance Frequently Asked Questions, ¶ 3 (Oct. 28, 2012).

[26] See U.S. Environmental Protection Agency, Source Water Protection Practices Bulletin – Managing Sanitary Sewer Overflows and Combined Sewer Overflows to Prevent Contamination of Drinking Water (Jul. 2001) (“SSOs and CSOs can carry bacteria, viruses, protozoa, helminths (intestinal worms), and inhaled molds and fungi directly into source water, and can cause diseases that range in severity from mild gastroenteritis to life-threatening ailments such as cholera, dysentery, infectious hepatitis, and severe gastroenteritis.  People can be exposed to the contaminant from sewage in drinking water sources, and through direct contact in areas of high public access such as basements, lawns or streets, or water used for recreation.”).

[27] See FEMA PDAT Field Manual, pp. 38-39.

[28] See id.  The broader standards applied in Federal contracting practice reflected in Federal court decisions, Federal Boards of Contract Appeals decisions, and Comptroller General decisions provide useful guidance in determining whether a change would be treated as a cardinal change.  FEMA does not imply that these Federal procurement decisions are controlling, but FEMA considers the collective wisdom within these decisions in determining the nature of third party contract changes along the broad spectrum between permissible and impermissible changes.  For a general overview of the tests used to analyze the permissibility of changes in federal contracts, see John Cibinic, Jr. and Ralph C. Nash, Administration of Government Contracts, 379-, 391, 4th Ed. Chicago: CCH Incorporated, 2006.

[29] “Infeasible.” Merriam-Webster.com. Accessed June 17, 2014. http://www.merriam-webster.com/dictionary/infeasible (defining “infeasible” as “not feasible; impracticable”). The term “impracticable” means something that is not capable of being done, effected, or accomplished. “Impracticable.” Merriam-Webster.com. Accessed June 17, 2014. http://www.merriam-webster.com/dictionary/impracticable (defining “impracticable” as “incapable of being performed or accomplished by the means employed or at command”). 

[30] S.D. Codified Laws § 5-18A-14.

[31] “Exigent.” Merriam-Webster.com. Accessed June 17, 2014. http://www.merriam-webster.com/dictionary/exigent. (defining “exigent” as “(1) requiring immediate aid or action <exigent circumstances>; (2) requiring or calling for much; demanding <an exigent client>”). 

[32] “Emergency.” Merriam-Webster.com. Accessed June 17, 2014. http://www.merriam-webster.com/dictionary/emergency. (defining “emergency” as “(1) an unforeseen combination of circumstances or the resulting state that calls for immediate action; (2) an urgent need for assistance or relief <the mayor declared a state of emergency after the flood>”). 

[33] FEMA PDAT Field Manual, p. 68.

[34] Id.

[35] 44 C.F.R. § 13.36(d)(4)(ii).

[36] Public Assistance Guide, FEMA 322 (June 2007), at 41.

[37] To independently evaluate these costs, FEMA did a search for all sewer projects for the City of Pierre, and calculated the average cost per day of the awarded contracts only. The average cost in five awarded contracts was $5,637/day, with a range of $4,095/day to $9,167/day. The contracted cost of the change order pertaining to this PW was $5,649/day, similar to the average.

 

21 May 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Nashville-Davidson County
Disaster Number: 
1909-DR-TN
DSR: 
4706 and 5511
Date Signed: 
Wednesday, May 20, 2015
PA ID: 
037-52004-00
Summary/Brief: 

Conclusion:  The Applicant’s insurance policy does not provide coverage for the damaged elements of two golf courses for which Project Worksheets were written; therefore, the reductions in the PWs for anticipated insurance proceeds should be reinstated.

Summary Paragraph

Between April 30, 2010 and May 18, 2010, severe storms, flooding, straight-line winds, and tornadoes caused damage throughout the state of Tennessee, resulting in major disaster declaration (FEMA-DR-1909-TN).  Floodwaters caused damage to two golf courses operated by the Metropolitan Government of Nashville-Davidson County (Applicant).  The flooding damaged electrical components of irrigation controller boxes, sand bunkers, golf cart pathways, and four putting greens.  FEMA prepared two Project Worksheets (PWs) to address the damage to the golf courses: PW 4706 to address the McCabe Golf Course and PW 5511 to address the Ted Rhodes Golf Course.  During project formulation, FEMA determined that the Applicant’s property insurance policy provided coverage for the damage to the golf courses and, accordingly, determined that the Applicant was not eligible for Public Assistance funding to restore the damage.  The Applicant appealed this decision, asserting that its insurance policy did not cover the damage to the golf courses because, whether the damage was considered “Infrastructure” or “Landscaping” under the policy, neither affords coverage when the damage is caused by flood.  The Region IV Regional Administrator denied the appeals, concluding that policy covered the damage because the damage was located at an “Insured Location” and/or “Miscellaneous Unnamed Location” under the policy.  The Regional Administrator also denied the Applicant’s request for an additional $13,090.75 for additional repair work it asserted was eligible under PW 4706 and not captured in the PW.  On second appeal, the Applicant asserts that all of the types of damage addressed in PWs 4706 and 5511 constitute “Landscaping” under the policy, coverage for which is not afforded when the damage is caused by flood.

Authorities

  • Stafford Act § 312(a), 42 U.S.C. § 5155(a)
  • Public Assistance Guide, FEMA 322 at 119 (June 2007)

Headnotes

  • Under the Stafford Disaster Act § 312(a), an applicant for federal disaster assistance cannot obtain assistance with respect to any part of a loss if the applicant has received financial assistance “under any other program or from insurance or any other source.”  Thus, under the Public Assistance Program, FEMA is required to reduce the amount of assistance for eligible work by the amount of any actual or anticipated insurance proceeds available for that work.

The Applicant’s insurance policy does not provide coverage for the damage under the two PWs written for the two golf courses and, therefore, the reductions in the PWs for anticipated insurance proceeds was not warranted.

Letter: 

James H. Bassham
Director
Tennessee Emergency Management Agency
3041 Sidco Drive, P.O. Box 41502
Nashville, Tennessee  37204

Re:     Second Appeals—Nashville-Davidson County, Insurance Reductions, FEMA-1909-DR-TN, Project Worksheets 4706 and 5511

Dear Mr. Bassham:

This is in response to a letter from your office dated September 18, 2012, which transmitted the referenced second appeal on behalf of the Metropolitan Government of Nashville-Davidson County (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency (FEMA) reduction of anticipated insurance proceeds from the amounts awarded under two Project Worksheets addressing damage to golf courses caused by flooding in 2010.

As explained in the enclosed analysis, the Applicant’s insurance policy does not provide coverage for the damage under the two PWs and, therefore, the reductions in the PWs for anticipated insurance proceeds should be reinstated.  The Applicant’s request for $13,090.75 for additional repair work under PW 4706 is eligible work, not covered under its insurance policy. Consequently, the Regional Administrator is instructed to review the Applicant’s supporting documentation and award eligible costs based on such.

Please inform the Applicant of my decision.  This determination constitutes the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.
 

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

cc: Garcia Szczech
      Regional Administrator
      FEMA Region IV

Analysis: 

Background

Between April 30, 2010 and May 18, 2010, severe storms, flooding, straight-line winds, and tornadoes caused damage throughout the state of Tennessee. A major disaster (FEMA-DR-1909-TN) was declared on May 4, 2010.  Floodwaters caused damage to two golf courses operated by the Metropolitan Government of Nashville-Davidson County (Applicant), the Ted Rhodes Golf Course and the McCabe Golf Course. 

Cumberland River floodwaters covered the Ted Rhodes Golf Course to an approximate average depth of eight feet.  The flooding damaged electrical components of controller boxes that served as the course’s main irrigation control centers, rendering all of the controllers inoperable.  In addition, the flooding caused extensive damage to 41 sand bunkers throughout the golf course, with floodwaters washing sand away and filling the bunkers and drainage system with silt and debris.

Richland Creek floodwaters caused damage to the McCabe Golf Course, including damage to two irrigation control boxes, damage to asphalt golf cart pathways, and damage to the subgrade, drainage system, gravel, root zone mixture, and top mix covering on four golf putting greens.

FEMA prepared two Project Worksheets (PWs) to address the damage to the golf courses: PW 4706 and PW 5511 to address the McCabe Golf Course and the Ted Rhodes Golf Course, respectively.  During project formulation, FEMA determined that the Applicant’s property insurance policy provided coverage for the damage to the golf courses and, accordingly, determined that the Applicant was not eligible for Public Assistance funding to restore the damage.  FEMA deducted $181,767.96 in anticipated insurance proceeds for PW 4706 for the McCabe Golf Course, leaving only direct administrative costs applicable to the PW, and deducted $333,499.38 in anticipated proceeds for PW 5511 for the Ted Rhodes Golf Course. 

First Appeal

On May 27, 2011, June 8, 2011 and November 30, 2011, the Applicant submitted first appeals to the Grantee challenging FEMA’s reductions for anticipated insurance proceeds to PW 4706 and PW 5511, and denial of additional items necessary to complete the repairs in PW 4706.  In the appeals, the Applicant asserted that its insurance policy did not cover the damage to the golf courses because, whether the damage was considered “Infrastructure” or “Landscaping” under the policy, neither affords coverage when the damage is caused by flood.

The Region IV Regional Administrator (RA) issued a response to the three appeals dated May 11, 2012, denying them.  The RA described the damaged property in the PWs as “improvements to land, landscaping, and pavement,” and determined that the policy applied because the damage was located at an “Insured Location” and/or “Miscellaneous Unnamed Location” under the policy.  The RA also denied the Applicant’s request of $13,090.75 for additional repair work based on the conclusion that the policy provided coverage for such costs.

Second Appeal

The Applicant submitted a second appeal dated July 23, 2012.  The Applicant asserts that the damage did not take place at an “Insured Location” or “Miscellaneous Unnamed Location” under the policy and that the types of damage addressed in PWs 4706 and 5511—irrigation control centers, sand bunkers, cart pathways, and putting greens—constitute “Landscaping”. Because the policy does not provide coverage for damage to “Landscaping” if the damage is caused by flood, the Applicant argues, the policy does not afford coverage for the types of damage addressed in PWs 4706 and 5511. 

The applicant also reasserts that it is eligible for an additional $13,090.75 of actual costs for irrigation repair parts and consulting fees to recommend the proper methodology for repair of the golf course, not originally captured in PW 4706.  Some of the invoices were included as backup documentation.  

The Tennessee Emergency Management Agency (Grantee) transmitted the second appeal to the FEMA Region IV Regional Administrator in a letter dated September 18, 2012.  The Grantee supports the appeal.

Discussion

Under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, an applicant for federal disaster assistance cannot “receive such assistance with respect to any part of [a] loss as to which he has received financial assistance under any other program or from insurance or any other source.” [1]  FEMA implements this requirement by reducing “the amount of assistance for eligible work by the amount of any actual or anticipated insurance proceeds available for that work.”[2]

Insured Location

The golf courses do not appear to constitute “Insured Locations” under the policy.  The policy insures property, including real property in which the insured has an insurable interest, “located at an Insured Location or within 1,000 feet thereof, to the extent of the interest of the insured in such property.”  The policy also states that coverage under it applies to an “Insured Location” unless otherwise provided.  Relevant here, an “Insured Location” is a location (1) listed on “Schedule of Locations” on file with the insurer or (2) “covered as a Miscellaneous Unnamed Location.” 

The “Schedule of Locations” lists eighteen specific locations on two appendixes.  The Ted Rhodes Golf Course and McCabe Golf Course are not included on the lists and, therefore, are not “Insured Locations” stemming from inclusion on the “Schedule of Locations.”

Under the policy, a Miscellaneous Unnamed Location is a “Location” that is “owned, leased, or rented by the Insured, but not specified in the Schedule of Locations.”  The policy further defines a “Location” as either “as specified in the Schedule of Locations” or, if not so specified, “a building, yard, dock, wharf pier or bulkhead (or any group of the foregoing) bounded on all sides by public streets, clear land space or open waterways, each not less than fifty feet wide.”  As discussed, the Ted Rhodes Golf Course and McCabe Golf Course are not included on the “Schedule of Locations,” and they are not a building, yard, dock, wharf pier or bulkhead.  Therefore, the golf courses are not “Insured Locations” by virtue of being “Miscellaneous Unnamed Locations.”

Landscaping

The policy provides “Additional Coverages” for physical loss or damage insured by the policy under several different types of categories, including “Infrastructure” and “Landscaping.” 

“Infrastructure” under the policy includes “street lighting, traffic signals, and control systems,” “underground piping,” “streets, roads, highways, sidewalks, bridges, tunnels, trestles, piers and docks,” and “street signs, traffic signs, and signs not attached to buildings.”  The types of damage elements addressed in PWs 4706 and 5511—irrigation control centers, sand bunkers, cart pathways, and putting greens—do not fall under the “Infrastructure” definition set forth in the policy.

“Landscaping” under the policy means “[l] and improvements including lawns, greens, fairways, tees; shrubs; trees; landscape gardening; and lawn sprinkler systems and related piping.”  The types of damage addressed in PWs 4706 and 5511 appear to fall within the definition of “Landscaping.”  The sand bunkers are landscape improvements that are part of the golf courses’ “lawns, greens, [and] fairways,” as are the golf cart pathways.  The golf courses’ irrigation control centers and boxes fall under the “Landscaping” definition as being part of “lawn sprinkler systems and related piping.”  Although the damage appears to fall within the coverage for “Landscaping,” that coverage only applies to “physical loss or damage to Landscaping caused by or resulting from fire, lightening, explosion, riot or civil commotion, vandalism or malicious mischief, aircraft, or vehicles.”  It, therefore, does not include physical loss or damage caused by flood; flood is not a listed peril associated with coverage for “Landscaping.”

A review of the Applicant’s insurance policy and associated materials submitted with its appeal indicates that the policy does not cover the damage captured in PWs 4706 and 5511 and, therefore, reductions for anticipated insurance proceeds should not have been applied.

Additional Costs

The applicant asserts that extensive repairs were needed to return the facility to its pre-disaster condition, and some of the lesser items were overlooked in the creation of the PW. These items included irrigation and fan parts, safety fence and irrigation repair for $5,355.75, as well as $7,735.00 in consulting fees related to the methodology to repair the facility. The Applicant requested the inclusion of these costs in the scope of work, but the request was denied as the RA determined these costs were covered under the Applicant’s insurance policy. As the policy does not apply, these costs are also eligible.

Conclusion

The damaged elements of the Ted Rhodes Golf Course and McCabe Golf Course are not located within an “Insured Location” under the Applicant’s policy.  Although the damaged elements may constitute “Landscaping” under the policy, coverage for landscaping does not apply to flood-related damage.  The Applicant’s policy does not provide coverage for the damaged elements of the Ted Rhodes Golf Course and McCabe Golf Course and, therefore, the reductions in PWs 4706 and 5511 for anticipated insurance proceeds should be reinstated.  Similarly, $13,090.75 for repair work that the Applicant asserts was excluded from the original PW and deemed covered by insurance, is also considered eligible work. Final costs for such work will be determined at project closeout, when all invoices and proof of payment can be reviewed.



[1]  See The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 312(a), 42 U.S.C. § 5155(a).

[2]  Public Assistance Guide, FEMA 322 at 119 (June 2007).

12 May 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
City of Tallahassee
Disaster Number: 
1785-DR-FL
DSR: 
PW 2149 and 2150
Date Signed: 
Monday, May 11, 2015
PA ID: 
073-70600-00
Summary/Brief: 

Conclusion:  Documentation provided by the Applicant demonstrated it was not feasible to repair only the observed point breaks so that the pipeline could perform its pre-disaster function.  The force main is not considered “repairable” and replacement is eligible.  No additional funding is eligible for draining and inspecting the pipeline, because FEMA approved reasonable, eligible costs for the services procured non-competitively.

Summary Paragraph

Heavy rainfall from Tropical Storm Fay caused the Capital Circle roadway sewer force main to rupture.  The City of Tallahassee (Applicant) performed emergency point repairs, which resulted in additional ruptures to the force main.  The Applicant concluded that the integrity of the force main had been so compromised that point repairs would not be sufficient to restore the pipeline; therefore, it requested funding for replacement.  FEMA determined that the cost of repairs would be less than 50 percent of the cost of replacement and that replacement was not eligible for funding.  FEMA approved funding for the repairs in Project Worksheet (PW) 2149 and for draining and inspecting the pipeline under contract in PW 2150.  FEMA found $186,964.18 in requested funding for work performed under contract ineligible, because the Applicant did not competitively bid the contracts.  FEMA developed cost estimates for the work and approved funding based on them. With its second appeal, the Applicant provided supplemental information demonstrating that it was not feasible to repair the pipeline.  The Applicant also asserted that the cost estimates do not address the complexity and emergency nature of the work.

Authorities and Second Appeals

  • 44 C.F.R. § 206.226(f)(1).
  • 44 C.F.R. §§ 13.36, 13.43.
  • OMB Circular A-87
  •  PA Guide, at 53.

Headnotes

  • Under 44 C.F.R. § 206.226(f)(1), a facility is considered repairable when disaster damages do not exceed 50 percent of the cost of replacing a facility to its pre-disaster condition, and it is feasible to repair the facility.
  • It was not feasible to restore the pipeline through point repairs.
  • According to 44 C.F.R. § 13.36(c), all procurement transactions have to provide full and open competition.  If an Applicant uses noncompetitive proposals to procure services, 44 C.F.R. § 13.36(d)(4)(ii), requires a cost analysis.
  • The Applicant did not competitively bid the contract services and did not complete a cost analysis.
  • 44 C.F.R. § 13.43(a) permits FEMA to disallow all or part of the costs incurred through noncompliant procurement procedures.
  • OMB Circular A-87 considers a cost reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under circumstances prevailing at the time.
  • PA Guide, at 53 allows reimbursement of costs FEMA finds fair and reasonable.
  • FEMA followed policy in determining reasonable, eligible costs for work procured non-competitively.
Letter: 

Bryan W. Koon
Director
State of Florida Division of Emergency Management
2555 Shumard Oaks Boulevard
Tallahassee, Florida  32399-2100

Re: Second Appeal – City of Tallahassee, PA ID 073-70600-00, FEMA-1785-DR-FL, Project Worksheets (PW) 2149 and 2150 – 50 Percent Rule and Procurement

Dear Mr. Koon:

This is in response to a letter from your office dated July 24, 2013, which transmitted the referenced second appeal on behalf of the City of Tallahassee (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $5,700,000.00 for the replacement of a damaged sewer force main and $82,832.00 for contract work to remove and dispose of sewage and to perform pipe inspections.

As explained in the enclosed analysis, I have determined that the Applicant has provided sufficient information to demonstrate it was not feasible to repair the force main.  Accordingly, I am granting the appeal as it relates to the replacement of the force main in PW 2149.  The Applicant also provided documentation to justify some of the actual costs claimed for the work; however it was not sufficient to support the $5,702,350.00 claimed. The documentation supported the eligibility and reasonableness of $5,225,747.89 for the replacement of the force main. 

Regarding the contracts for sewage removal and disposal and inspections, I have determined that the Applicant did not competitively bid the services nor did it perform a cost analysis at the time it procured the contract services.  Therefore, I am denying the appeal as it relates to the services in PW 2150.  By copy of this letter, I am requesting the Regional Administrator to take appropriate action to implement this determination.  Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. §206.206, Appeals.
 

Sincerely,

/s/


William W. Roche
Director
Public Assistance Division                                                                       

Enclosure

cc: Garcia Szczech
      Regional Administrator
      FEMA Region IV

Analysis: 

Background

On August 24, 2008, Tropical Storm Fay deposited approximately 18 inches of rain in the Tallahassee area causing the Capital Circle roadway sewer force main to rupture. This facility was a 36-inch fiberglass pipe beneath a roadway that carried one-third of Tallahassee’s sewage volume. The City of Tallahassee (Applicant) conducted an emergency point repair, which was immediately followed by a rupture at a different location; following a repair of that rupture, a third rupture occurred in a different location. To evaluate the condition of the force main, the Applicant performed a low-pressure fill test, which resulted in more failures. The Applicant then conducted a video inspection, which showed nine additional visible point breaks in the force main. Approximately 14 percent of the force main could not be video inspected due to standing water and other factors; however, a tenth break was detected in the uninspected area.

The Applicant’s city engineer determined that the integrity of the force main had been compromised and that point repairs would not sufficiently restore the force main. Consequently, the Applicant proposed replacing 10,000 linear feet of damaged force main. The Applicant estimated that excavation and replacement in the roadway would cost $7.3 million, and that approach was expected to cause significant traffic disruptions. To reduce costs, the Applicant proposed a slip line replacement (estimated at $3.9 million) combined with installation of a supplemental pipeline outside the road right-of-way (estimated at $2.8 million) to compensate for the resulting reduced capacity. Ultimately, the Applicant settled on what it determined to be the most cost-effective and feasible method of replacement: replacement of 7,600 linear feet using “pipe bursting” along the current alignment and re-aligning a portion of force main to shorten the length of the pipe bursting by approximately 1,400 linear feet to reduce costs and to avoid working in a busy intersection. For the re-aligned portion, that Applicant installed 700 feet of ductile iron pipe using an open trench. The total replacement cost was $5.7 million.

FEMA determined the Applicant’s proposed course of action was not eligible for funding and prepared three Project Worksheets (PWs) for the damaged pipeline, as follows:

  • PW 2071 for $673,489.25 for the repair of the three ruptures.
  • PW 2149 for $696,583.00 for the repair of the ten additional point breaks that were identified through video inspection. FEMA developed a cost estimate for the ten point break repairs and evaluated the eligibility of the replacement of the force main in accordance with Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.226(f)(1), Repair vs. replacement (the “50 Percent Rule”). FEMA determined that, because the cost of repair was less than 50 percent of the cost of the replacement, only the point break repairs were eligible.
  • PW 2150 for $316,140.91 for the removal and disposal of sewage in the force main and use of robotics for assessing the force main’s conditions.  FEMA found $186,964.18 in requested funding for work performed under contract ineligible, because the Applicant did not competitively bid the contracts.  FEMA developed cost estimates for the work and approved funding based on those cost estimates.

First Appeal

The Applicant appealed FEMA’s determination in a letter dated November 24, 2010. As to PW 2149, the Applicant argued that FEMA erroneously applied the 50 Percent Rule by failing to consider the infeasibility of repairing only the point breaks. As to PW 2150, the Applicant requested an additional $117,721.46 stating that FEMA underestimated the eligible costs because it did not consider the cost impacts of the complexity, time constraints, and work conditions associated with the work of draining, transporting, and disposing of the sewage from the pipeline and performing an internal assessment using robotics. The Applicant did not appeal PW 2071.

The Florida Division of Emergency Management (Grantee) transmitted the Applicant’s appeal to FEMA Region IV in a letter dated March 14, 2011. The Grantee asserted that, for PW 2149, FEMA’s cost estimate for the repair of each break was too low.  According to the Grantee, if a more reasonable estimate was used, the total repair cost would exceed 50 percent of the replacement cost. For PW 2150, the Grantee noted that actual costs were higher than FEMA’s estimate and should be used to prepare the PW.

The FEMA Region IV Regional Administrator denied the first appeal in a letter dated September 28, 2012. As to PW 2149, the Regional Administrator reaffirmed that the repair cost was less than 50 percent of the replacement cost and, therefore, determined that replacement was not eligible in accordance with 44 C.F.R. § 206.226(f)(1). The Regional Administrator stated that the Applicant did not submit any additional data to dispute the accuracy of FEMA’s scope of work, estimate, or conclusion that repair costs exceeded 50 percent of replacement costs.  Additionally, the Regional Administrator stated that the $5,700,000.00 in actual costs claimed by the Applicant included costs to relocate the force main and did not solely consist of the costs of repairing and restoring it to its pre-disaster condition.  The Regional Administrator noted that, in accordance with 44 C.F.R. §206.226(g)(1), relocation is not eligible because the facility was not destroyed.

Regarding PW 2150, the Regional Administrator stated that the Applicant would receive reimbursement for the actual costs it incurred only for the performance of items within the eligible scope of work, as part of the final inspection process.

Second Appeal

The Applicant submitted a second appeal in a letter dated January 18, 2013, and submitted supplemental material in a letter dated July 19, 2013.  For PW 2149, the Applicant asserted that FEMA did not apply the requirements of 44 C.F.R. § 206.226(f)(1) correctly. Specifically, the Applicant stated that FEMA focused only on the comparison of the respective costs of repair and replacement and, instead, should have based its decision on the regulatory requirement that “a facility is considered repairable when … it is feasible to repair the facility so that it can perform the function for which it was being used as well as it did immediately prior to the disaster.” The Applicant provided information it asserted would demonstrate that the repair was not feasible and that the force main had to be replaced. The supplemental information included a March 2013 report, prepared by the engineering firm MWH Global, Inc., that:

  • Provided detailed discussion of the cause of damage to the force main due to extreme surge and vacuum conditions.
  • Described physical evidence of damage and weakening that was observed following excavation of portions of the force main and results of testing performed on excavated portions by the pipe’s manufacturer.
  • Described the likelihood of additional, unobserved weaknesses and failures due to delamination of the pipe and occurrence of micro fractures, as well as unobserved failures in portions of the force main that could not be video inspected.
  • Described requirements for certification by the engineer of record and permitting by state agencies and the reasons why the certification and permitting could not have been obtained for point repairs.

The Applicant also asserted that the Florida Department of Transportation and Florida Department of Environmental Protection, which are responsible for permitting the work, would not have given consent for point repairs because such repairs would not have met reliability requirements. The second appeal supplemental information included letters from these agencies informing the Applicant that point break repairs would not be a satisfactorily reliable approach to repairing the damage.

For PW 2150, the Applicant disagreed with the decision to address reimbursement of reasonable costs at final inspection.  The Applicant asserted that doing so would deny it of its appeal rights and relied on the documentation submitted with its first appeal to support its position that the actual contract costs are eligible.

Subsequent to submitting its second appeal, FEMA requested additional documentation from the Applicant to further support its position with respect to the eligibility of the contract costs in PW 2150.   In response to that request, the Applicant submitted a description of the scope of work of each contract and of the procurement procedures followed.  The Applicant also provided some details regarding its objection to FEMA’s cost estimates and reduced its claim to an additional $82,832.00 (from $117,721.46) for the contract work.  The comprehensive submission was designed to support the Applicant’s position that FEMA did not consider the “complexity and emergency nature of this work, combined with unique working conditions” (e.g. “being located in a six-lane heavily trafficked highway and working 24 hours per day”) when developing its cost estimates. 

Discussion

PW 2149

Under the Public Assistance Program, a facility is considered repairable when disaster damages do not exceed 50 percent of the cost of replacing a facility to its pre-disaster condition, and it is feasible to repair the facility so that it can perform the function for which it was being used as well as it had immediately prior to the disaster.[1]

The data submitted with the second appeal, which included documentation from the state permitting agency that the proposed point repair work was unreliable and would not be approved, demonstrate that it would not have been feasible to repair only the observed point breaks so that the force main could have performed as it had prior to the disaster.  As noted, the storm caused numerous intermittent pump failures and power fluctuations within the Applicant’s wastewater system, which resulted in flow variations within the force main. These flow variations produced transient pressure conditions that were large enough to damage the force main. These transient pressure conditions would have traveled throughout the force main, potentially damaging locations in addition to those that were observed through rupture or through video inspection. Moreover, as described in the 2013 MWH Global, Inc. report, excavation of the pipe during repair revealed delamination and fracturing, which indicate reductions in the wall strength of the pipe. Video inspection could not have identified this damage, and point break repairs would not have addressed it.

The observed point breaks and the evidence of damage revealed during excavation indicate the potential for widespread damage to the force main. Considering this damage and the likelihood of additional interior and exterior damage in unobserved segments of the force main, it is reasonable to conclude that the force main could not be restored only through point break repairs. This conclusion is also consistent with the determination of state permitting agencies and FEMA Headquarters technical experts who reviewed the materials provided.

The FEMA Regional Administrator included the issue of relocation in its basis for denying the first appeal in accordance with 44 C.F.R. §206.226(g). The facility was not relocated in its entirety; rather, a portion of the force main was re-aligned for reasons of constructability and to reduce the cost of the replacement. Therefore, 44 C.F.R. §206.226(g) is not applicable to this situation and the force main replacement is eligible. 

Based on a review of documentation supporting the Applicant’s actual costs claimed, summarized in Table 1, the eligible cost for the replacement is $5,225,747.89.  As noted in Table 1, the Applicant did not competitively procure all portions of the project.  FEMA performed a review of the bids and actual costs for those portions of the work that the Applicant did not procure competitively and found the costs to be reasonable. 

TABLE 1

 

Description

Initial Request

Revised Request

Eligible for Reimbursement

Comments

Force Main Pilot

$487,100

$501,652

$387,100

Deducted $114,552 in change order costs related to a change in scope.  Applicant provided no explanation of scope change.

Work Package 1A - Non-competitive Procurement

$1,648,350

$1,667,271

$1,548,349

Bid cost found to be reasonable based on review by independent Technical Specialist.  Deducted $118,922 in change order costs related to a change in scope.  Applicant provided no explanation of scope change.

Work Package 1B - Non-competitive Procurement

$571,250

$516,222

$516,222

Bid cost is reasonable based on review by independent Technical Specialist. 

Work Package 2

$1,558,952

$1,481,233

$1,481,233

Actual cost decreased due to change order and less materials needed.  Applicant provided sufficient documentation to support change.

Materials

$1,010,375

$1,017,287

$1,010,375

Deducted $6,912 for additional material associated with change orders for Force Main Pilot and Work Package 1A.  Applicant provided no explanation for the change in scope.

MWH – Pre-existing contract

$270,499

$259,360

$259,360

Cost is reasonable.

PBSJ – Pre- existing contract

$101,375

$101,221

$0

Applicant provided no details regarding the scope of work performed.

PBSJ – Pre-existing contract

$2,510

$2,510

$2,510

Cost is reasonable.

CES/Southern Earth Sciences – Non-competitive Procurement

$36,354

$20,599

$20,599

Cost is reasonable.

Force Account Labor

$42,274

$80,241

$0

Supporting documentation contains many discrepancies.

Miscellaneous Overtime

$48,331

$54,504

$0

Applicant provided no explanation supporting costs claimed.

FDEP Permit

$250

$250

$0

No supporting documentation.

TOTAL

$5,777,620

$5,702,350

$5,225,748

 

 

PW 2150

Pursuant to 44 C.F.R. § 13.36(b), Procurement Standards, when procuring services under a federal grant, subgrantees use their own procurement procedures which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in section 13.36.  Consistent with 44 C.F.R. § 13.36(b), grantees and subgrantees must maintain records sufficient to detail the significant history of a procurement.[2]  These records must include the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.[3]  In addition, all procurement transactions have to be conducted in a way that provides “full and open competition.”[4]

The Applicant did not competitively procure the services funded in PW 2150.  According to 44 C.F.R. § 13.36(d)(4)(i), “[p]rocurement by noncompetitive proposals may be used only when the award of a contract is infeasible under small purchase procedures, sealed bids or competitive proposals and one of the following circumstances applies: (A) The item is available only from a single source; (B) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; (C) The awarding agency authorizes noncompetitive proposals; or (D) After solicitation of a number of sources, competition is determined inadequate.”[5]  Further, “[c]ost analysis, i.e., verifying the proposed cost data, the projections of the data, and the evaluation of the specific elements of costs and profits, is required.”[6]  Here, the Applicant has sufficiently supported that the emergency nature of the repair required expediency, but the Applicant did not perform cost analyses for any of the contracts awarded for the work.

Pursuant to 44 C.F.R. § 13.43(a), Remedies for Noncompliance, “if an Applicant materially fails to comply with any term of an award, whether stated in a Federal statute or regulation, an assurance, in a State plan or application, a notice of award, or elsewhere, FEMA may take a number of actions”.  FEMA’s options include: temporarily withholding cash payments pending correction of the deficiency, disallowing all or part of the cost of the activity or action not in compliance, wholly or partly suspending or terminating the current award for the grantee's or subgrantee's program, withholding further awards for the program, or taking other remedies that may be legally available.[7]

Rather than disallow all costs incurred through noncompliant procurement procedures, FEMA policy allows reimbursement of costs it finds fair and reasonable.[8]  A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.[9]  FEMA will generally analyze cost reasonableness by use of historical documentation for similar work, average costs for similar work in the area, published unit costs from national estimating databases, and FEMA cost codes.[10]  The Regional Administrator, in denying the first appeal on this issue, determined that FEMA approved reasonable, eligible costs for the services procured non-competitively in PW 2150 in accordance with this policy. The Applicant disagreed with the regional calculated costs, stated their reasons for not agreeing, but provided no documentation to support otherwise.  FEMA used average costs for similar work in the area, in accordance with the PA Guide.

Conclusion

The data submitted with the second appeal demonstrate that it would not have been feasible to repair only the observed point breaks and return the force main to its pre-disaster function.  Accordingly, replacement of the force main is eligible. The eligible replacement includes the portion of the damaged force main that was realigned, and the eligible cost for the project is $5,225,747.89.

The Applicant has not provided sufficient documentation supporting reasonable costs associated with non-compliant procurement procedures.  Accordingly, no additional funding will be provided for the work approved in PW 2150.



[1] 44 C.F.R. § 206.226(f)(1) (2008).

[2] 44 C.F.R. § 13.36(b)(9) (2008).

[3] Id.

[4] Id. at § 13.36(c)(1).

[5] Id. at § 13.36(d)(4)(i).

[6] Id. at § 13.36(d)(4)(ii).

[7] Id. at § 13.43(a)(1)-(5).

[8] Public Assistance Guide, FEMA 322, at 53, (June 2007) [hereinafter PA Guide].

[9] Office of Mgmt. & Budget, Exec. Office of the President, OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments (2004)

[10] PA Guide, at 40-41.

12 May 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Memorial Hospital at Gulfport
Disaster Number: 
4081-DR-MS
DSR: 
PW 631
Date Signed: 
Monday, May 11, 2015
PA ID: 
047-UHJ7Y-00
Summary/Brief: 

Conclusion:  Pursuant to 44 C.F.R. § 206.225, the work performed by the Applicant’s staff during and following Hurricane Isaac is not emergency work.  Therefore, the costs reflected in PW 631 for force account labor overtime and meal vouchers for staff are considered increased operating expenses and ineligible for PA funding.

Summary Paragraph

Following Hurricane Isaac, FEMA drafted Project Worksheet (PW) 631 to capture the costs associated with the actions taken by the Applicant during and after the disaster.  FEMA obligated PW 631 for $40,516.56 to reflect costs incurred to operate and maintain generators.  However, FEMA determined that $410,665.61 for force account labor overtime and $24,845.00 for meals to feed staff were ineligible for PA funding because FEMA considers these costs increased operating expenses.  In the first appeal, the Applicant asserted that the force account labor overtime was used to continue a critical public service, provide medical care and emergency medical care services to patients, and maintain functional generators to ensure electricity throughout the hospital.  In addition, the Applicant asserted that, due to a “lock down” situation, the Applicant had to feed its staff while they were confined to the hospital.  The FEMA Region IV Regional Administrator (RA) determined that the cost associated with PW 631 was an increased operating expense, and as such, was not an eligible emergency cost.  In the Applicant’s second appeal, it requests $435,510.61 for costs incurred during and after Hurricane Isaac, again asserting the force account labor overtime costs reflected eligible emergency work and FEMA should reimburse them. 


Authorities and Second Appeals

  • 44 C.F.R. § 206.225.
  • DAP 9525.4, Emergency Medical Care and Medical Evacuations, at 1-3.
  • Ochsner Clinic Foundation, FEMA-1603-DR-LA, at 2 (Oct. 3, 2008).
  • PA Guide, at 54.

Headnotes

  • Pursuant to 44 C.F.R. § 206.225, emergency protective measures to save lives, to protect public health and safety, and to protect improved property are eligible for PA funding. 
  • According to DAP 9525.4, costs associated with providing temporary facilities for emergency medical care of disaster survivors when existing facilities are destroyed or severely impacted are eligible for PA funding.  However, increased administrative and operating costs to a hospital due to increased or anticipated increased patient load, labor costs for medical staff, and increased costs for feeding residents and staff of critical facilities are ineligible for PA funding.
  •  The Applicant required staff to stay onsite and provided meal vouchers during a “lock down” period during and following Hurricane Isaac.  The Applicant claimed costs for this work as emergency protective measures.

FEMA policy explicitly states costs associated with this type of work are ineligible for PA funding because they are increased operating expenses

Letter: 

May 11, 2015

Mr. Robert Latham, Jr.
Executive Director
Mississippi Emergency Management Agency
220 Popps Ferry Road
Biloxi, Mississippi  39531

Re: Second Appeal – Memorial Hospital at Gulfport, PA ID 047-UHJ7Y-00, FEMA-4081-DR-MS, Project Worksheet (PW) 631 – Increased Operating Expenses

Dear Mr. Latham:

This is in response to a letter from your office dated September 17, 2014, which transmitted the referenced second appeal on behalf of Memorial Hospital at Gulfport (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $435,510.61 in Public Assistance (PA) funding for force account labor overtime and meals provided to staff.

As explained in the enclosed analysis, I have determined that the activities conducted by the Applicant following Hurricane Isaac and addressed in PW 631 are ineligible for PA funding because they are increased operating expenses.  Therefore, I am denying the appeal. 

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.
 

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

cc: Garcia Szczech
     Regional Administrator
     FEMA Region IV

Analysis: 

Background

In August 2012, Hurricane Isaac caused street flooding, downed trees and power lines, and power outages throughout Gulfport City, Mississippi.  Gulfport City and Harrison County imposed a curfew causing a “lock down” scenario at Memorial Hospital at Gulfport (Applicant).  As a result, the Applicant initiated a Hurricane Alert Status (HAS) plan that included keeping medical staff at the hospital for approximately 72 hours in anticipation that the next regularly scheduled shift would be unable to report due to the storm, authorizing meal vouchers to employees, and operating and maintaining four generators.  FEMA drafted Project Worksheet (PW) 631 to capture the costs associated with the actions taken by the Applicant during and after the disaster.  FEMA obligated PW 631 for $40,516.56 to reflect costs incurred to operate and maintain the generators.  However, FEMA determined that $410,665.61 for force account labor overtime and $24,845.00 for meals to feed staff were ineligible for PA funding because FEMA considers those costs increased operating expenses.

First Appeal

In the first appeal dated January 31, 2013, the Applicant asserted that the force account labor overtime was used to continue a critical public service, provide medical care and emergency medical care services to patients, clean up and remove water infiltration, relocate patients, ensure security, and maintain functional generators.  In addition, the Applicant asserted that the City and Harrison County imposed curfew during the disaster, prevented staff from leaving the hospital, and necessitated the Applicant feeding them for the duration of the curfew.

In a letter dated May 23, 2014, the FEMA Region IV Regional Administrator (RA) determined that the cost associated with PW 631 was an increased operating expense, and as such, was not an eligible emergency cost.  The RA cited to the second appeal determination for Ochsner Clinic Foundation[1] in which FEMA concluded that overtime labor costs of medical staff are not eligible for PA funding.

Second Appeal

In its second appeal dated July 23, 2014, the Applicant requests $435,510.61 for costs incurred during and after Hurricane Isaac.  The Applicant states Hurricane Isaac created a “lockdown” situation that was extraordinary in nature.  The Applicant asserts the force account labor overtime costs reflected eligible emergency work and FEMA should reimburse them.  In a letter dated September 17, 2014, the Grantee elaborates by explaining the Applicant’s staff ensured that normal medical services would continue, assisted with securing the facility, helped stabilize and relocate patients, helped to ensure that generators were running, and ensured that critical equipment maintained power and continued to function.   

Discussion

Pursuant to 44 C.F.R. § 206.225, emergency protective measures to save lives, to protect public health and safety, and to protect improved property are eligible for PA funding.[2]  This includes measures, such as emergency medical care, that eliminate or lessen immediate threats to life, public health or safety, or additional damage to improved public or private property through cost effective means.[3]  FEMA DAP 9525.4, Emergency Medical Care and Medical Evacuations, provides that PA funding may be available to eligible applicants for the extraordinary costs associated with providing temporary facilities for emergency medical care of disaster survivors when existing facilities are overwhelmed if the costs are reasonable and customary for the emergency medical services provided.[4]  However, increased administrative and operating costs to a hospital due to increased or anticipated increased patient load, labor costs for medical staff, and increased costs for feeding residents and staff of critical facilities are ineligible for PA funding.[5]

In supporting its appeal, the Applicant cites to FEMA DAP 9525.4 as allowing for reimbursement of force account labor overtime when personnel are performing eligible work.  However, this policy specifically states that eligible work includes assistance for emergency medical care and medical evacuations of disaster survivors from a public or private nonprofit medical facility that has been destroyed or severely compromised by the disaster.[6]  In addition, this policy applies to temporary medical facilities, not facilities that normally operate as hospitals.[7]  Here, the Applicant’s facility still operated as a regular hospital at the time of the disaster.   Therefore, DAP 9525.4 does not apply.

The Applicant also argues that, due to Hurricane Isaac and the city-issued curfew that followed, it initiated a HAS plan that required physicians, nurses, and other medical staff to stay onsite beyond their normal work schedules.  The Applicant contends the disaster and subsequent curfew mandated a “lockdown” of the facility which was “extraordinary in nature.”  However, the Ochsner Clinic Foundation second appeal also involved a facility that was “locked down” during a declared disaster.  In that case, FEMA determined that the overtime paid to medical personnel was an increased operating expense regardless of cause.[8]  Pursuant to FEMA policy, requiring medical personnel to stay onsite to perform their normal work duties during an emergency is not an emergency protective measure.[9]  While the Grantee argues that the staff performed some duties that may be eligible work, the Applicant did not sufficiently substantiate this assertion.[10]  Finally, FEMA guidance explicitly states increased costs for feeding hospital staff is ineligible for PA funding.[11]  Therefore, FEMA policy prohibits granting relief with respect to the meal vouchers provided to the Applicant’s staff during and after Hurricane Isaac. 

Conclusion

The costs reflected in PW 631 for force account labor overtime and meal vouchers for staff are considered increased operating expenses. As such, the work performed by the Applicant’s staff during and following Hurricane Isaac is not emergency work, and consequently ineligible for PA funding. 



[1] FEMA Second Appeal Analysis, Ochsner Clinic Foundation, FEMA-1603-DR-LA, at 2 (Oct. 3, 2008).

[2] 44 C.F.R. § 206.225(a)(1).

[3] See 44 C.F.R. § 206.225(c); see also Disaster Assistance Policy 9525.4, Emergency Medical Care and Medical Evacuations, at 1 (Jul. 16, 2008).

[4] DAP 9525.4, Emergency Medical Care and Medical Evacuations, at 2.

[5] Id. at 3; see also Public Assistance Guide, FEMA 322, at 54 (June 2007) [hereinafter PA Guide].

[6] See DAP 9525.4, Emergency Medical Care and Medical Evacuations, at 1.

[7] Id. at 2-3; see also Ochsner Clinic Foundation, FEMA-1603-DR-LA, at 2 (stating “[w]e believe that the section 7.A of the policy is clear: eligible costs must be associated with an eligible applicant providing temporary facilities for treating disaster victims when their existing facilities are overloaded and cannot accommodate the patient load.  The policy does not authorize reimbursement for increased costs incurred in its regular facility.”).

[8] Ochsner Clinic Foundation, FEMA-1603-DR-LA, at 2.

[9] See PA Guide, at 54 (stating the costs for providing a service, including increased hospital patient care costs, are ineligible for PA funding).

[10] On December 17, 2014, FEMA sent a Request for Information (RFI) to the Applicant and Grantee requesting sufficient documentation, including but not limited to, an applicable salary/pay policy, fringe benefits plan, timesheets, and a detailed record of work performed, including the name and title/position of each employee, hours worked, demonstrating the type and extent of work completed by its employees during the disaster.  As of the date of issuance of this appeal, FEMA had not received a response to its RFI. 

[11] PA Guide, at 54.

29 Apr 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Adams County Board of Supervisors
Disaster Number: 
1983-DR-MS
DSR: 
PW 209
Date Signed: 
Monday, April 27, 2015
PA ID: 
001-99001-00
Summary/Brief: 

Conclusion: On second appeal, the Adams County Board of Supervisors (BOS) (Applicant) failed to demonstrate that the damage to its culvert was the result of the disaster.  Accordingly, FEMA cannot approve a revised scope of work for Project Worksheet 209 nor § 406 Hazard Mitigation for this project.

Summary Paragraph

During the incident period in 2011, the Mississippi River experienced severe flooding which resulted in loss of clay gravel surface material, dirt fill material, deep rutting, and numerous “soft spots” on the Applicant’s road known as Jackson Point Road (Facility).  FEMA drafted Project Worksheet (PW) 209 to document damage and eligible costs associated with washouts on a 4.5 mile length of the Facility to include the roadway surface atop a three-section box culvert.  On August 7, 2012, eleven months after the initial repairs were completed, the Applicant requested that FEMA revise the scope of work in PW 209 to replace the box culvert.  FEMA denied the request because the Applicant had not demonstrated that the culvert’s damage was attributable to Disaster 1983. In its first appeal, the Applicant asserted that it provided documentation that proved the destruction of the culvert was the result of the disaster event and that FEMA erroneously used pictorial evidence to deny the change in scope.  The Region IV Regional Administrator (RA) denied the first appeal based on his determination that the water levels were sufficiently low when PW 209 was drafted; therefore, FEMA staff would have been able to identify a collapsed portion of the box culvert and any embankment subsidence.  In the second appeal, the Applicant asserts that the damage to the culvert was latent, could not be discovered at the time of the site visit, and was disaster-related.

Authorities and Second Appeals

  • Stafford Act § 406, 42 U.S.C. § 5172.
  • 44 C.F.R. § 206.223(a)(1).
  • RP9526.1, Hazard Mitigation Funding Under Section 406 (Stafford Act) at 4.
  • PA Guide, at 101.

Headnotes

  • 44 C.F.R. § 206.223(a)(1) states that an item of work must be required as the result of the disaster event in order to be eligible for Public Assistance funding.  
  • The Applicant failed to demonstrate that the damage to its culvert was disaster-related.
  • According to the PA Guide, the scope of work describes the work that is necessary to repair the damage or replace the facility and provides the cost estimate.  If additional damage is discovered once the PW is completed, the Applicant must document the damage, show how the damage is disaster-related, and request a re-inspection by FEMA.
  • Applicant could not demonstrate the culvert was damaged by Disaster 1983.  Therefore, FEMA will not authorize a revised scope of work for PW 209.
  • Recovery Policy RP9526.1, Hazard Mitigation Funding Under Section 406 (Stafford Act) states mitigation measures will be performed as part of the overall project.
  • Since the work outlined in PW 209 was completed in September 2011, mitigation measures cannot be approved for this project. 
Letter: 

April 27, 2015


Mr. Robert Latham, Jr.
Executive Director
Mississippi Emergency Management Agency
220 Popps Ferry Road
Biloxi, Mississippi  39531

Re: Second Appeal – Adams County Board of Supervisors, FEMA-1983-DR-MS, PA ID 001-99001-00, Project Worksheet (PW) 209 – Scope of Work

Dear Mr. Latham:

This is in response to your letter dated June 13, 2014, which transmitted the referenced second appeal on behalf of Adams County Board of Supervisors (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $1,106,214.49 in Public Assistance funding for a revised scope of work to address repairs to its culvert.  In the alternative, the Applicant requests $719,192.77 for 406 Hazard Mitigation.    

As explained in the enclosed analysis, I have determined that the Applicant failed to demonstrate that the damage to its culvert was the result of the disaster.  Accordingly, FEMA cannot approve a revised scope of work for PW 209 nor approve Stafford Act § 406 Hazard Mitigation for this project.  Therefore, I am denying the appeal.

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

CC: Garcia Szczech
       Regional Administrator
       FEMA Region IV

Analysis: 

Background

From May 3 through June 17, 2011, the Mississippi River experienced severe flooding which resulted in loss of clay gravel surface material, dirt fill material, deep rutting, and numerous “soft spots” on an Adams County Board of Supervisors’ (Applicant) road known as Jackson Point Road (facility).  Based on the Applicant’s force account labor and equipment 100 percent completion date of September 15, 2011, FEMA drafted Project Worksheet (PW) 209 to document damage and eligible costs associated with washouts on a 4.5 mile length of the facility to include the roadway surface atop a three-section box culvert area known as Narrows.  The site inspection occurred in October 2011 but damage to the box culvert was not identified to FEMA’s Project Specialist at that time nor prior to PW completion.

On August 7, 2012, the Applicant requested that the scope of work in PW 209 be revised to replace the box culvert.  The request was made eleven months after the initial repair was completed.  FEMA denied the request because the Applicant did not demonstrate the culvert’s damage was attributable to the declared disaster.

First Appeal

In its first appeal, dated April 9, 2013, the Applicant asserted that it provided documentation that proved the destruction of the culvert was the result of the disaster event.  The Applicant argued that the facility was completely inundated by flood waters at the time of FEMA’s site inspection.  Therefore, it was impossible to discover the destruction of the area around the box culverts.  The Applicant asserted that the additional damage was latent and not discoverable until after the PW was drafted.  The Applicant stated that its engineer’s narrative confirms that the damage was latent.  Finally, the Applicant asserted that FEMA erroneously found that the pictorial history showing multi-year inundation and a total inundation in 2009 contributed to the culvert’s damage.  The Applicant stated that its audit records and engineer reports show that the culvert had no instances of damage due to the inundation of flood waters until the declared disaster (FEMA-1983-DR-MS). 

On February 14, 2014, the Region IV Regional Administrator (RA) denied the first appeal based on his determination that the water levels were sufficiently low when FEMA drafted PW 209; therefore, FEMA staff would have been able to identify a collapsed portion of the box culvert and any embankment subsidence.  The RA also noted that PW 209 included a photo of the project that indicated the floodwaters had receded and that the claimed damage was not visible.  Finally, the RA stated that the Applicant provided no documentation in addition to its appeal letter to support its position.   

Second Appeal

In its second appeal, dated May 27, 2014, the Applicant requests additional scope of work in the amount of $1,106,214.49 be added to PW 209 or, in the alternative, FEMA obligate $719,192.77 for a substitute bridge to serve as Stafford Act § 406 Hazard Mitigation.  The Applicant assert that, after Disaster 1983, it repaired the facility as it had after previous floods.  However, the downstream portion of the facility continued to sink and slough.  The Applicant provides signed documents from the County Engineer and County Road Manager.  The County Engineer’s letter states that Disaster 1983 caused damage to the culvert.[1]  The letter states, “[a]pparently the apron and downstream section of the triple barrel box bridge was undermined when the water went out of the Narrows as evident by the loss of section of the roadway at the discharged end of the box.  This allowed the barrel joint to shift and allow further undermining.”[2]  The County Road Manager’s memorandum states, “[b]ased upon my experience, the damage to the culvert was caused by an extremely high water level and it could take up to twelve months for the damage to be noticeable.”[3]

On October 14, 2014, FEMA hosted a conference call with the Applicant and Grantee.  Following the conference call, the Applicant submitted additional documentation, including maintenance records, inspection reports, and additional pictures of the culvert.

Discussion

Scope of Work

Pursuant to the Stafford Act § 406, FEMA Public Assistance funding may be available to a state or local government for the repair, restoration, reconstruction or replacement of damaged or destroyed facilities under a major disaster.[4]  In addition, Title 44 Code of Federal Regulations §  206.223(a)(1) states that an item of work must be required as the result of the disaster event in order to be eligible for Public Assistance funding.[5]  FEMA policy provides that the scope of work describes the work that is necessary to repair the damage or replace the facility and provides the cost estimate.[6]   If additional damage is discovered once the PW is completed, the Applicant must document the damage, show how the damage is disaster-related, and request a re-inspection by FEMA.[7]

In October 2011, FEMA conducted a site visit of the facility.  During the site visit, FEMA did not document damage to the culvert.  The Applicant asserts that additional damage caused by FEMA-DR-1983-MS was latent and not discovered until after the completion of PW 209.  The Applicant requested a change in scope of work to address additional damage to its culvert in August 2012.  While the Applicant did document the additional damage, it failed to demonstrate that the additional damage is disaster-related.  Neither the County Engineer’s letter nor the County Road Manager’s memorandum provide analysis or explanation as to the conclusions that:

1) FEMA-DR-1983-MS caused damage to the culvert and 2) it could take up to twelve months to detect the additional damage.  In addition, the County Engineer’s letter acknowledges the facility experienced an inundation of water after floods during the previous five years.[8]  If the Applicant’s assertion regarding latent damage is correct, it is feasible that any or all of these flooding incidents contributed to the culvert’s damage.  Moreover, the additional documentation that the Applicant provided does not conclusively demonstrate that the damage was disaster-related.  The last inspection report on record was issued in 2006, five years before the flood and six years before the damage occurred.  Several intervening flood events could have resulted in damage to the culvert.  Without more definite evidence, such as an engineering report, that connects the damage to the culvert to this particular disaster, FEMA cannot provide funding for the repair work requested by the Applicant.       

In June 2012, the Applicant took pictures of the culvert and road atop the culvert.  The Applicant submitted these pictures to refute the RA’s determination that photos taken during the site visit demonstrate that waters had receded and that the claimed damage was not visible.  The Applicant’s June 2012 pictures show cracks and severe deterioration of the road above the culvert.  However, this damage is not present in FEMA’s October 2011 pictures.  FEMA’s pictures do not demonstrate that the road was inundated with water, and, in fact, support the RA’s assertion that “water levels were sufficiently low… to identify a collapsed portion of the box culvert and any embankment subsidence.”  Considering that the pictures taken by FEMA in October 2011 were taken closer to the disaster event than the pictures taken by the Applicant in June 2012, FEMA’s reliance on the October 2011 pictures was appropriate.  Based on the pictorial evidence and the lack of documentation demonstrating that the culvert was damaged by the declared disaster, FEMA is unable to approve a revised scope of work for PW 209.    

406 Hazard Mitigation

FEMA policy states that funding for Stafford Act § 406 Hazard Mitigation measures may be approved if the original facility and its function will be restored and the mitigation work is “still needed, is technically feasible, and will be performed as part of the overall project.”[9]  The Applicant completed the work outlined in PW 209 in September 2011.  Since the project has been completed and FEMA is not approving the revised scope of work, the hazard mitigation work would not be performed as part of the overall project and is therefore ineligible.

Conclusion

Pursuant to 44 C.F.R. § 206.223, the Applicant failed to demonstrate that the damage to its culvert is the result of FEMA-DR-1983-MS.  Accordingly, FEMA is unable to approve a revised scope of work for PW 209.  In addition, because the project has been completed, FEMA cannot fund mitigation measures to replace the culvert with a bridge.     


[1] Letter from County Engineer, Jordan, Kaiser & Sessions, LLC to County Administrator, Adams County (May 16, 2014) [hereinafter Letter from County Engineer].

[2] Id.

[3] Memorandum from Road Manager, Adams County, MS Road Department to County Administrator, Adams County (May 14, 2014).

[4] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 102, 42 U.S.C. § 5172 (2007).

[5] 44 C.F.R. § 206.223(a)(1) (2011).

[6] See Public Assistance Guide, FEMA 322 at 101 (June 2007).

[7] Id.

[8] See Letter from County Engineer.

[9] Recovery Policy RP9526.1, Hazard Mitigation Funding Under Section 406 (Stafford Act) at 4 (Mar. 30, 2010) (emphasis added).

22 Apr 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
University of Iowa
Disaster Number: 
1763-DR-IA
DSR: 
10546
Date Signed: 
Monday, April 6, 2015
PA ID: 
103-03027-00
Summary/Brief: 

Conclusion:  FEMA grants a time extension to restore the convenience store.  The RA has granted a time extension to complete repairs to the Mayflower Dormitory, and the Applicant has shown that the store has not yet been restored to the pre-disaster design, function, and capacity.

Summary Paragraph

Severe storms and flooding from DR-1763 damaged building contents at the University of Iowa Mayflower dormitory on May 25 to August 13, 2008.  FEMA prepared PW 10546 to replace the contents of the building.  The Applicant submitted a time extension request to complete the replacement of building contents.   FEMA denied the time extension citing that the hazard mitigation proposal should not impact the replacement of the contents.  In a first appeal letter, the Applicant appealed FEMA’s denial and requested a time extension through February 28, 2015.  The Applicant cited PW 1102 for the Mayflower dormitory building repairs, which received a time extension through January 31, 2015 and stated that it wanted to wait until the repairs were complete to replace the contents.  The Regional Administrator (RA) denied the first appeal based upon the fact that PW 1102 states that the building repairs were completed prior to January 2009.  The RA states that a time extension for PW 1102 was approved because a Hazard Mitigation Proposal was recently approved, not because the repair work was ongoing.  The RA maintained that the convenience store (C-Store) was permanently restored to the pre-disaster function, noting that the Applicant made repairs to the C-Store and “has continued to operate the facility for more than five years.”  The Applicant submitted a second appeal stating that a temporary C-Store was built for the immediate school year and that permanent repairs are still needed to restore it to the pre-disaster condition.

Authorities and Second Appeals

  • 44 C.F.R. § 206.204(d).
  • 44 C.F.R. § 206.226.
  • PA Guide, at 29, 139.

Headnotes

  • 44 C.F.R. § 206.204(d) and the Public Assistance Guide provide the RA the authority to grant time extensions appropriate to the situation.
  • 44 C.F.R. § 206.226 and the Public Assistance Guide state that work to restore eligible facilities to the pre-disaster design, function, and capacity as they existed immediately prior to the disaster is eligible.
    • The Applicant demonstrated through a design report that the C-Store has not yet been restored to the pre-disaster design, function, and capacity.
Letter: 

April 06, 2015

Mark Schouten
Administrator
Iowa Homeland Security and Emergency Management Division
7105 NW 70th Avenue
Camp Dodge, Bldg. W-4
Johnston, Iowa 50131-1824

Re:  Second Appeal – University of Iowa, PA ID 103-03027-00, FEMA-1763-DR-IA, Project Worksheet 10546 – Time Extension - Work

Dear Mr. Schouten:

This is in response to your letter dated April 10, 2014, which transmitted the referenced second appeal on behalf of the University of Iowa (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of a time extension to replace the contents of the Mayflower dormitory.

As explained in the enclosed analysis, I have determined that the Applicant has provided sufficient justification to warrant a time extension.  Accordingly, I am granting the appeal.  By copy of this letter, I am requesting the Regional Administrator to take appropriate action to implement this determination.

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division                                                                      

Enclosure

cc: Beth Freeman
      Regional Administrator
      FEMA Region VII

Analysis: 

Background

Severe storms and flooding from FEMA-1763-DR-IA damaged building contents at the University of Iowa (Applicant) Mayflower dormitory on May 25 to August 13, 2008.  Floodwaters inundated the building, flooding the first floor with three feet of water and completely submerging the basement and sub-basement.  On June 16, 2010, FEMA prepared PW 10546 to replace the contents of the Mayflower dormitory, including commercial kitchen shelving, kitchen equipment, an ice cube maker, and an expresso machine.  The cost was $96,942.00 in contents and $850.00 in Direct Administrative Costs (DAC).  Anticipated National Flood Insurance Program proceeds were deducted in the amount of $96,942.00.  As a result, FEMA obligated $850.00.  Work was to be completed by May 27, 2012.

In a May 31, 2011 letter, the Applicant requested a time extension until September 30, 2013 to complete the work.  The same day, the Grantee granted a time extension until May 27, 2012 and requested that FEMA extend the deadline until September 30, 2013 due to the size and complexity of the scope of work of the project.  On August 31, 2011, FEMA denied the time extension request citing that the repairs to the dormitory were completed in January 2010 and a recently submitted Hazard Mitigation Proposal (HMP) for the Mayflower Dormitory building PW should not impact the replacement of the building contents.[1]  On September 1, 2011, the Grantee notified the Applicant of the time extension denial.  The Applicant submitted a second time extension request on July 10, 2012.  On April 11, 2013, FEMA denied this second time extension request.

First Appeal

In a first appeal letter submitted June 5, 2013, the Applicant appealed FEMA’s denial of the time extension and requested a time extension through February 28, 2015.  The Applicant states that temporary repairs were made to the dormitory “to quickly accommodate immediate needs and to be operational in time for fall classes in 2008.”  The Applicant was “waiting for the final permanent recovery and mitigation to be approved before purchasing the contents.”  FEMA PW 1102, version four, captures the permanent work to repair the convenience store (C-Store)[2] on the first floor of the Mayflower dormitory.  The Applicant seeks to purchase the building contents in connection with the permanent repairs as it is more costly to purchase and store the contents before the building is ready for them.  Reporting of the completion of the permanent recovery and mitigation projects for the Mayflower dormitory is scheduled to occur in April, 2015 and the Applicant plans to install the contents after the work is complete.

The Applicant states that it did not appeal the first time extension denial because it seemed insignificant “in light of the magnitude of the ongoing issues with the flood recovery and mitigation construction project” and the Applicant “believed that the denial was based upon a misunderstanding of the project.”[3]  The Applicant “was under the impression that the denial would be resolved logically in connection with the final resolution of repair and mitigation issues and a new extension on those projects.”[4]

On July 16, 2013, the Grantee forwarded the first appeal to FEMA, supporting the appeal.  The Grantee points out that while FEMA states that the permanent repairs to the building were completed in January 2010, an April 15, 2013 letter from the Applicant requested a time extension until May 31, 2014 for the permanent repairs to the Mayflower dormitory on PW 1102.

On August 5, 2013, FEMA submitted an RFI requesting the permanent work completed to date, the date the approved mitigation was started, and the work remaining to complete the mitigation.  FEMA also asked for the contents purchased as of May 27, 2012, which was the current work deadline.  The Applicant responded on September 5, 2013 with a timeline, a list of contents purchased, and a list of contents to be purchased.  The list of contents purchased includes “items that were not identified/obligated on PW 10546 [version 0], as noted in writing by the University when the Project Worksheet was signed on June 24, 2010.”[5]  The timeline provided by the Applicant is reflected below.

  • “August 2008 – Completed immediate recovery sufficient to reoccupy student dorm rooms.  Included building mechanical and control systems, fire protection system, IT service, building electrical supply, security system, electrical distribution to the southern [third] of the lobby, four elevators, two staff apartments, replaced  first floor doors and hardware, repaired broken exterior windows and repaired student mailbox/post office.”[6]
  • “January 2009 – Completed recovery of the north half of the lobby including front desk, staff offices and remaining 14 student/staff apartments located on the first floor and created temporary C-[S]tore.  No other construction work has been done since January 2009.”[7]
  • “July 2013 – All remaining permanent recovery and flood mitigation work approved and obligated by FEMA.  This includes the construction of a permanent and portable flood wall system, de-watering wells, storm sewer and storm water pumping station, back-up electrical generators for the mitigation systems, permanent recovery of the C-Store, removal of the temporary C-Store and restoration of the remaining lobby where the C-Store is currently located.  This project was publicly bid on July 30, 2013 and … construction activities will begin the first two weeks of September.”[8]
  • “[Work] is scheduled to be completed on or before January 31, 2015.”[9]

On December 16, 2013, Region VII issued a first appeal response denying the appeal based upon the fact that PW 1102, written for the Mayflower dormitory, states that the building repairs were completed prior to January 2009.  The Regional Administrator (RA) reasoned that since the repairs to the building were complete, there is no reason to delay purchasing the contents.  The RA stated that time extensions for the Mayflower dormitory in PW 1102 were approved because the Hazard Mitigation Proposal was recently approved, not because the repair work was ongoing.  The RA maintained that the initial repairs to the C-Store restored it to the pre-disaster function and were therefore permanent repairs.  This is supported by the assertion that the Applicant made repairs to the C-Store and “has continued to operate the facility for more than five years.”[10]

Second Appeal

On February 13, 2014, the Applicant submitted a second appeal for a time extension for PW 10546.  To prove that the repairs to the Mayflower dormitory were not completed prior to January 2009, the Applicant cites a February 8, 2010 consultant report that states “[t]he remaining component to recover is the Convenience Store.”[11]  The Applicant goes on to explain that a September 9, 2011 letter to the Grantee addresses the discrepancies found in version four of PW 1102.  “In the letter, the [Applicant] notes that the initial work performed to re-open the Mayflower dormitory … was not the permanent repairs to recover the building to its condition prior to the flood and that this work was also not captured in the project worksheet.”  The Grantee responded to the Applicant, “suggesting that when the project worksheet was obligated, [it] could be appealed.”  During this period, there were many discussions between FEMA, the Grantee, and the Applicant.  The Applicant was told that discrepancies could be resolved at closeout, and, therefore, it did not appeal version four of the PW.  While most of the contents listed in PW 10546 have already been ordered, the remaining contents to be ordered are associated with the C-Store.  “The final work to reconfigure the C-[S]tore back to the format that existed prior to the flood, and install the contents … [is] to be completed with the construction project for the building.”

On April 10, 2014, the Grantee forwarded the second appeal to FEMA and supported the Applicant’s position.  The Grantee states that FEMA “denied the [Applicant’s] … [first] appeal due to the apparent misunderstanding that permanent repairs to the facility were completed.”  “As explained by the [Applicant] in an email dated April 4, 2014 … a temporary Convenience Store was erected within the lobby as the permanent repairs could not be completed until the design of the permanent repairs to the facility as well as the HMP were finalized. … The permanent repairs to the Convenience Store and lobby are ongoing to date.”  Although PW 1102 does not mention the construction of a temporary Convenience Store, the Applicant pointed this out to the Grantee and was under the impression this discrepancy could be resolved at closeout.  The Grantee noted that page three of the Schematic Design Report, Mayflower Hall – Permanent Flood Recovery and Mitigation report dated July 3, 2012, also indicates that permanent repairs to the Convenience Store are still needed:

“Recovery of the majority of the damaged interior to the Mayflower was completed immediately after the flood to allow the building to reopen for the 2008 Fall School Semester.  The only spaces remaining to be recovered are the Convenience Store, Vending and Lounge areas.  Recovery for this project will include restoring these spaces to pre-flood conditions.”

On April 17, 2014, Region VII forwarded the second appeal to FEMA HQ.

Discussion

44 C.F.R. § 206.204(d) states that “[r]equests for time extensions beyond the Grantee’s authority shall be submitted by the Grantee to the Regional Administrator” with a “detailed justification for the delay and a projected completion date.”[12]  The Applicant requested a time extension through February 28, 2015 and explained that the delay was so that building contents can be purchased in conjunction with permanent repairs to the C-Store since the RA granted a time extension until January 31, 2015 for PW 1102 to complete the permanent repairs.  The RA has authority to grant extensions appropriate to the situation.[13]  The RA claims that the Applicant has completed all permanent repairs to the facility and the time extension to complete the permanent repairs was granted solely due to the Applicant’s Hazard Mitigation Proposal. 

44 C.F.R. § 206.226 states that “[w]ork to restore eligible facilities on the basis of the design of such facilities as they existed immediately prior to the disaster … is eligible.”[14]  Permanent work includes restoring the facility back to its pre-disaster design, function, and capacity.[15]  In the second appeal, the Applicant provides a Schematic Design Report that shows the current location of the interim C-Store and the pre-disaster location of the store.[16]  The interim C-Store is smaller, located in a different section of the lobby of the Mayflower Dormitory, and is displacing a space that served as a lounge prior to the disaster.[17]  Therefore, permanent repairs are still needed to restore the Mayflower Dormitory lobby and the C-Store to the pre-disaster design, function, and capacity.  It is not reasonable to require the Applicant to purchase building contents before the building is restored.  Even though the first appeal decision states that the time extension for permanent repairs for PW 1102 was solely due to an HMP and permanent repairs to the C-Store were completed, this limitation was the result of a factual misunderstanding.  The Schematic Design Report delineates the temporary nature of the C-Store and consequently justifies granting an extension for all building repairs.  Since the RA granted a time extension for the building repairs, a time extension should have also been granted for the building contents.

Conclusion

The RA has granted a time extension for the Applicant to complete repairs to the Mayflower Dormitory.  The Applicant has shown that the convenience store has not yet been restored to the pre-disaster design, function, and capacity.  Therefore, it is appropriate to the situation for FEMA to have granted a time extension until February 28, 2015 to restore the convenience store contents.  Due to the timeframe in which FEMA responded to this appeal, if a further time extension is required, the Applicant should submit one and the RA should consider it.  Such an extension is warranted.         



[1] PW 1102, for permanent repairs to the Mayflower Dormitory, states that work was completed by Jan. 1, 2009.  Upon further review, the work had not been completed at any of the identified completion dates.

[2] In this document, C-Store and Convenience Store are used interchangeably.

[3] First Appeal Letter from Chief Risk Officer, University of Iowa, to Alternate Governor’s Authorized Representative, Iowa Homeland Security and Emergency Management Division Recovery Bureau, at 1 (June 5, 2013).

[4] Id.

[5] RFI Response from University of Iowa to FEMA, at 2 (Sept. 5, 2013).

[6] Id. at 1.

[7] Id.

[8] Id.

[9] Id.

[10] FEMA First Appeal Analysis, University of Iowa, FEMA-1763-DR-IA, at 2 (Dec. 16, 2013).

[11] While the Applicant did not provide a copy of the February 8, 2010 report, a revised report was provided.  See Schematic Design Report, Mayflower Hall – Permanent Flood Recovery and Mitigation, at 3 (July 3, 2012).

 

[12] 44 C.F.R. § 206.204(d)(2) (2007).

[13] Public Assistance Guide, FEMA 322, at 139 (June 2007) [hereinafter PA Guide].

[14] 44 C.F.R. § 206.226 (2007).

[15] PA Guide, supra note 13, at 29.

[16] See Schematic Design Report, Mayflower Hall – Permanent Flood Recovery and Mitigation, at 5 (July 3, 2012).

[17] Id.

 

17 Apr 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Clarksville Gas and Water
Disaster Number: 
1909-DR-TN
DSR: 
2418
Date Signed: 
Tuesday, March 31, 2015
PA ID: 
125-U00B3-00
Summary/Brief: 

Conclusion:  Pursuant to 44 C.F.R. § 206.223(a), the Applicant sufficiently demonstrated that it was legally responsible for two exterior high-voltage transformers and related switches located within its wastewater treatment plant at the time of the disaster.  Accordingly, the cost associated with replacing the transformers and related switches is eligible for PA funding. 

Summary Paragraph

Beginning on April 30, 2010, severe storms, tornadoes, heavy rains, high winds, flooding, and flash flooding affected the City of Clarksville.  FEMA prepared PW 2418 to document damage to the Administration, Laboratory, and Mechanical Building (Facility) within the Applicant’s wastewater treatment plant.  FEMA denied funding for the Facility because, using GPS coordinates, it determined that the Facility was found to be within the boundaries of a United States Army Corps of Engineers (USACE) easement.  In the first appeal, the Applicant asserted that the easement did not contain an indemnification provision in favor of the United States.  In addition, the Applicant asserted that two transformers and related switches were excluded from the scope of work in PW 2418, but were eligible for PA funding.  As such, the Applicant requested an additional $82,000.00 in funding for the cost of the transformers and related switches.  The Regional Administrator (RA) partially approved PW 2418 for $3,005,187.90 for replacement of the Facility.  However, the RA determined that the Applicant was not legally responsible for the transformers and related switches and denied funding associated with their replacement.  In the Applicant’s second appeal, it asserts that it owned the transformers; thus, it is legally responsible for them.


Authorities and Second Appeals

  • Stafford Act § 406, 42 U.S.C. § 5172.
  • 44 C.F.R. § 206.223(a).
  • OMB Circular A-87, 2 C.F.R. § 225.
  • PA Guide, at 23, 30-31.

Headnotes

  • Pursuant to 44 C.F.R. § 206.223(a), an eligible item of work must be the legal responsibility of the Applicant. 
  • In addition, the PA Guide provides that legal responsibility can be conveyed through a lease or other legal instrument.
    • Based on a signed and notarized affidavit and other supporting documents, the Applicant demonstrated that it was legally responsible for the replacement of the transformers and related switches.     
  • Pursuant to OMB Circular A-87, allowable costs must be, among other things, reasonable.
    • Using RS Means, FEMA established that the Applicant’s request for $82,000.00 to replace two high-voltage transformers and related switches is reasonable. 
Letter: 

March 31, 2015

David Purkey
Director
Tennessee Emergency Management Agency
3041 Sidco Drive, P.O. Box 41502
Nashville, Tennessee 37204-1502

Re: Second Appeal – Clarksville Gas and Water, PA ID 125-U00B3-00, FEMA-1909-DR-TN, Project Worksheet (PW) 2418 – Legal Responsibility

Dear Mr. Purkey:

This is in response to a letter from your office dated July 10, 2014, which transmitted the referenced second appeal on behalf of Clarksville Gas and Water (Applicant).  The Applicant appealed a total of seven PWs; the remaining PWs will be addressed in separate determination letters.  Regarding PW 2418, the Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $82,000.00 in Public Assistance (PA) funding for two exterior high-voltage transformers and related switches located within its wastewater treatment plant.

As explained in the enclosed analysis, I have determined that, pursuant to 44 C.F.R. § 206.223, the Applicant is legally responsible for the transformers and related switches.  In addition, the Applicant’s request for $82,000.00 in PA funding to replace the transformers and related switches is reasonable.  Therefore, I am granting the appeal.  By copy of this letter, I am requesting the Regional Administrator take appropriate action to implement this determination. 

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/


William W. Roche
Director
Public Assistance Division

Enclosure

cc:  Garcia Szczech
       Regional Administrator
       FEMA Region IV

Analysis: 

Background

Beginning on April 30, 2010, severe storms, tornadoes, heavy rains, high winds, flooding, and flash flooding affected the City of Clarksville.  FEMA prepared PW 2418 to document disaster-related damage to the Administration, Laboratory, and Mechanical Building (Facility) within the Clarksville Gas and Water’s (Applicant) wastewater treatment plant.  Pursuant to FEMA policy regarding repair versus replacement, FEMA determined that the Facility was eligible for replacement.  During the preparation of PW 2418, FEMA, using GPS coordinates and United States Army Corps of Engineers (USACE) overlay flooding boundary maps, determined that the Facility was located within a USACE easement.  Subsequently, FEMA denied all costs to replace the Facility. 

First Appeal

In the first appeal letter, dated June 24, 2011, the Applicant asserted that, while the Facility was located within the USACE easement boundary line, the easement did not include a “hold harmless” provision in favor of the United States Government.  In addition, the Applicant asserted that the easement did not preclude FEMA from providing PA funding for disaster-related claims.  Since FEMA previously determined that the work was a result of the disaster and otherwise eligible for PA funding, the Applicant argued that $3,005,187.90 should be reinstated to PW 2418.  The Applicant also requested additional funding for two exterior high-voltage transformers and related switches excluded from the original scope of work in PW 2418. 

In a letter dated May 13, 2014, the Region IV Regional Administrator (RA) partially granted the appeal, approving $3,005,187.90 for costs associated with the replacement of the Applicant’s Facility, because he concurred with the Applicant’s position that the provisions of the USACE easement did not apply to the issue of eligibility regarding PW 2418.  However, the RA denied $82,000.00 in costs associated with the two transformers and switches maintained by the Applicant because it could not demonstrate ownership.  The RA stated, “[t]he appeal… did not provide the level of information necessary to make eligibility determinations on the transformers and switches, therefore these costs have been determined ineligible unless the Subgrantee is prepared to provide ownership documents at project close-out.”

Second Appeal

In the second appeal, dated June 30, 2014, the Applicant again requests reimbursement for the two transformers and related switches in the amount of $82,000.00.  With the second appeal, the Applicant provides a notarized affidavit from the Clarksville Department of Electricity’s (CDE) General Manager and other documentation to demonstrate legal responsibility.[1]  In the affidavit the General Manager explains that CDE conveyed the transformers to the Applicant in June 2000.  

Discussion

Legal Responsibility

The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), Section 406, authorizes FEMA to make contributions to an eligible Applicant to restore eligible facilities on the basis of the design of such facilities as they existed immediately prior to the disaster.[2]  In addition, if equipment and furnishings located within a facility are damaged beyond repair, comparable items are eligible as replacement items.[3]  Pursuant to Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.223(a), an eligible item of work must be required as the result of the disaster event, be located within a designated disaster area, and be the legal responsibility of the applicant.[4] The Applicant has fulfilled the first two requirements of § 206.223(a); the issue on appeal is whether the Applicant is legally responsible for the replacement of the transformers.  The legal responsibility to repair a facility usually resides with the owner of the facility, unless the owner has transferred the responsibility to another party by lease or other legal instrument.[5]

The Applicant asserts that it purchased the transformers from CDE in 2000 as part of a renovation project.[6]  As Work Order Number 1215, dated February 22, 2001, demonstrates, the two transformers at issue were located within the Applicant’s wastewater treatment plant.[7]  The Applicant also submitted a notarized affidavit from CDE’s General Manager, in which the General Manager affirms that CDE sold the two transformers to the Applicant prior to the disaster.  In addition, the General Manager states that a standard CDE practice is that all equipment behind the primary electric meter belongs to the customer (i.e., in this instance, the Applicant).  The Applicant admits that copies of the invoices related to the purchase cannot be located; however, the Applicant submitted records that summarize the invoices related to the sale, including History Inquiry statements.[8]  Finally, the Applicant provides a 2001 memorandum of costs associated with the wastewater treatment plant expansion project.  It states, “[t]his cost includes poles, wire, underground cables, and metering equipment to complete the project.” 

FEMA notes that the Applicant has not provided precise documentation demonstrating its legal responsibility for the two transformers for which it seeks reimbursement.  However, FEMA also recognizes that precise documentation is not always available.  Based on the totality of the information provided (i.e., the location of the transformers behind the Applicant’s Facility, the signed and notarized affidavit, Work Order Number 1215, and the History Inquiry statements), FEMA concludes that the Applicant’s documentation is sufficient to demonstrate that it was legally responsible for the transformers at the time of the disaster.  As such, replacement of the transformers is eligible for PA funding.

Allowable Costs

Pursuant to the Stafford Act § 406, FEMA is authorized to provide reimbursement for the associated expenses incurred by a local government during the repair, restoration reconstruction, or replacement of a facility damaged as the result of a declared disaster.[9]  Generally, costs that can be directly tied to the performance of eligible work are eligible for FEMA reimbursement.[10]  However, these costs must, among other things, be reasonable and necessary to accomplish the work, comply with applicable federal, state, and local laws, regulations and procurement requirements, and be adequately documented.[11]  Although the Applicant did not submit invoices, receipts, or other documentation that state the cost of the two transformers, FEMA researched the average cost of transformers[12] and determined that the cost requested by the Applicant is reasonable.[13]  Accordingly, the cost to replace the transformers in the Applicant’s Facility is eligible for PA funding.

Conclusion

The Applicant provided sufficient documentation to demonstrate the replacement of two transformers and related switches is eligible for PA funding.  In addition, the requested cost associated with these items is deemed reasonable.   



[1] General Manager Affidavit, notarized June 23, 2014 [hereinafter Affidavit].

[2] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 406, 42 U.S.C. § 5172 (2007).

[3] See 44 C.F.R. § 206.226(h) (2009).

[4] 44 C.F.R. § 206.223(a).

[5] See generally Public Assistance Guide, FEMA 322, at 23, 30-31 (June 2007) [hereinafter PA Guide].

[6] See Affidavit (stating that, in conjunction with 2000 and 2001 upgrades, the Applicant asked CDE to move the primary electric meter at the wastewater treatment plant, placing it before two transformers and switch gear equipment servicing the plant.)

[7] Second Appeal, Clarksville Gas and Water, FEMA-1909-DR-TN, at Exhibit 2 (June 30, 2014).

[8] Id.

[9] Stafford Act § 406(a)(1)(A), 42 U.S.C. § 5172.

[10] PA Guide, at 40.

[11] See Office of Mgmt. & Budget, Exec. Office of the President, OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, at Attachment A  (2004) (codified at 2 C.F.R. § 225).

[12] Using RS Means, FEMA researched the average cost for high-voltage transformers.  The range in cost for these transformers is from $20,000 to $147,000 per transformer.  The Applicant requested $41,000 per transformer which falls on the low end of that range. 

[13] See PA Guide, at 41  (explaining that FEMA will generally analyze cost reasonableness by use of historical documentation for similar work, average costs for similar work in the area, published unit costs from national estimating databases, and FEMA cost codes).