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Second Appeal Letter
PA ID# 000-92003; North Carolina Department of Transportation
DSR ID# 31569,36858; Contractor overtime labor and travel expenses
February 19, 1999
Mr. Eric L. Tolbert, Director
North Carolina Division of Emergency Management
Disaster Recovery Operations Center
205 West Cabarrus Street
Raleigh, North Carolina 27601
Dear Mr. Tolbert:
This letter is in response to your June 4, 1998, second appeal on behalf of the North Carolina Department of Transportation (NCDOT). The NCDOT is appealing the Federal Emergency Management Agency's (FEMA's) determination to not fund overtime labor and travel expenses incurred by a contractor while performing duties otherwise performed by the State during Hurricane Fran (FEMA-1134-DR-NC). Such funding was requested through DSRs 31569 and 36858.
In response to Hurricane Fran, the North Carolina Department of Transportation (NCDOT) helped the North Carolina Division of Emergency Management (NCDEM, State) administer the FEMA Public Assistance Program. However, due to its inability to provide a sufficient number of engineers, the NCDOT contracted with the engineering firm of Post, Buckley, Schuh and Jernigan, Inc. (PBS&J) to prepare damage survey reports, final inspection reports, project applications, final audits, and related field inspections.
The FEMA inspector prepared DSR 31569 in the amount of $1,020,418 to include all regular time and overtime labor and expenses incurred by PBS&J. The FEMA reviewer, however, determined that only straight time labor was eligible, and reduced the eligible costs to $547,378. The determination was based on the premise that PBS&J was acting on behalf of the Grantee, such that overtime labor and expenses would be covered under the State's administrative allowance. A second DSR, DSR 36858, was later prepared in the amount of $511,817 for additional costs incurred by PBS&J. This DSR again omitted overtime and travel expenses estimated at an additional $337,672. The total cost of the ineligible work (DSR 31569 and 36858) is $810,712.
The State submitted a first appeal of FEMA's denial of funding for overtime and travel expenses in a letter dated February 6, 1998. The State asserted that the administrative allowance provides only for services performed by State employees, and not independent contractors. Therefore, the State concluded that PBS&J, as a contractor to the State, should be eligible for reimbursement of overtime and travel expenses. The Regional Director denied the first appeal in a letter dated March 27, 1998. Although the funding for administrative allowances authorized by the Stafford Act refers to the work being performed by State employees, it has been interpreted by FEMA that the allowance covers those overtime and travel costs of other personnel, including contractors, when substituting for and performing the function of State employees. At the time the Stafford Act was being developed, States were only using State employees to administer the Public Assistance program, such that there was no other frame of reference. Accordingly, the first appeal response concluded that the overtime and travel costs of services performed by PBS&J are covered in the statutory administrative costs.
The State submitted a second appeal of this determination in a letter dated June 4, 1998. The second appeal responded to comments made by the Regional Director in the first appeal response, but did not provide any new information. As in the first appeal, the primary argument raised by the State is that the personnel hired through PBS&J are not State employees within the meaning of the Stafford Act and the applicable regulations, and therefore, all costs by PBS&J are reasonable, allowable costs. However, our review of the eligibility of contractor efforts concurs with the analysis provided by the Regional Director in the first appeal, concluding that the costs for the type services provided by PBS&J are covered in the State's administrative allowance, regardless of who performs the services - State or contractor.
The intent of the State's administrative allowance (44 CFR 206.228(a)(2)(i)) is to provide funding for extraordinary costs incurred for the preparation of damage survey reports, final inspection reports, project applications, final audits, and related field inspections, including overtime pay, per diem and travel expenses. Accordingly, the State has been provided funding through the administrative allowance for the scope of such services, whether performed by the State or by PBS&J. The State has stressed that the services of PBS&J were performed due to the lack of State personnel; therefore, by their own admission, it is understood that these services were performed in lieu of State efforts. Thus, it is expected that the State would reimburse overtime and travel expenses of PBS&J from the administrative funding allowance received by the State. The State's appeal is denied.
Please inform the applicant of my determination. In accordance with the appeal procedure governing appeal decisions made on or after May 8, 1998, my decision constitutes the final decision on this matter. The current appeal procedure was published as a final rule in the Federal Register on April 8, 1998. It amends 44 CFR 206.206.
Lacy E. Suiter
Executive Associate Director
Response and Recovery Directorate
cc: John B. Copenhaver
FEMA Region IV