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Second Appeal Analysis
PA ID# 037-70000; City of Santa Monica
DSR ID# 76720,22960; Engineering and Design Services
During January 14, 1994, Earthquake and after shocks resulted in surface cracks on the interior walls and ceiling of some buildings in the City of Santa Monica. As a result of these damages, DSRs 76720 and 22960 were processed to cover damages in the Montana Library and the Clover Park Building respectively.
These DSRs were prepared to reimburse the subgrantee for repair work that could be described as minor, and included patch and paint, repair of bookcase, replace light diffusers and repair a door. Each of these DSRs contained an allowance of 3% to cover construction inspection services.
DSR 76720 was originally written in the amount of $2,590, however, a deduction was made in the amount of $169 for the engineering design and bid preparation costs because the scope of work in the DSR does not justify the need for those services. In addition, the DSR contained a Hazard Mitigation Proposal to tie down large shelving units, shelf supports and fastening of shelving books. This mitigation measure was not approved because none of these items were related to the damaged elements caused by the earthquake and listed in the eligible scope of work.
DSR 22960 was originally written in the amount of $4,506, nevertheless a deduction was made in the amount of $665 for the engineering design and bid preparation costs because the scope of work in this DSR does not justify the need for those services.
On January 9, 1995, the Governor's Authorized Representative submitted to FEMA the first appeal from the City of Santa Monica. The applicant requested that a cost benefit analysis be performed to evaluate the cost effectiveness of the mitigation proposal. The subgrantee also requested a reconsideration of the elimination of the engineering and design costs.
On letter of August 1995, the Northridge Area Recovery Manager denied the first appeal from the subgrantee. The reason for the denial was that it is FEMA's policy to deny any Hazard Mitigation Proposals that do not relate to the damage elements for which reconstruction work on a facility is performed. In addition, it was determined that the type of work included in this DSR does not require engineering and design services.
The City of Santa Monica is presenting their second appeal of FEMA's deduction of costs related to engineering and bid preparation services, and the denial of the Hazard Mitigation Proposals attached to the above mentioned DSRs.
The second appeal is based on essentially the same argument as for the first appeal.
FEMA's position is that Engineering and Design services may be eligible for inclusion in a DSR. However, the extent of these services must be appropriate in relation to the work described in the scope of work. Accordingly, FEMA's consideration of Engineering and Design costs eligibility depends on the scope of work, size and complexity of each individual project, and the specific needs for those services.
Engineering and Design services include preliminary engineering analysis, schematic design, design development, and construction documents in addition to the basic construction inspection services.
The subgrantee has packaged numerous sites together to accomplish permanent repairs to city facilities totaling more than $1.5 million. They choose this approach due to economies of scale associated with the preparation of bid documents and construction management. It is FEMA's position that Engineering and Design fees are not required for the scope of work of DSRs 76720 and 22960.
Construction inspection services include review of bids, work site inspection visits, checking and approval of material samples, review of shop drawings and change orders, review of contractor's requests for payment, and acting as the owner's representative. It is the scope of eligible work that determines the need, if any, for full engineering and design, or limited construction inspection services. Clearly, the scopes of work of DSR 76720 (paint, repair of bookcase, replace light diffuser and repair a door) and DSR 22960 (cracked light fixture diffuser, patch and paint gypsum wall board, replace diffuser and repair door) do not justify engineering, design, architectural and bid preparation services.
It is FEMA's policy that when the nature of the work only requires basic construction inspection services, a fee that does not exceed 3% of construction cost is used. It is recognized the actual costs for inspection may be more or less than the estimate. Since these DSRs are small projects, the estimate will usually serve as FEMA's final cost determination. If a subgrantee completes all small projects and find that there is a significant net cost overrun, the subgrantee may submit a request for additional funding. FEMA will not adjust small project costs DSR by DSR.
Concerning the Hazard Mitigation appeals, the subgrantee has not demonstrated a direct relationship between damaged items and a Hazard Mitigation Proposal. For example, in DSR 76720, the HMP contains three items related to shelving attachment and support. They argue that since the scope of work of the DSR contains repair to a loose bookcase in the work room, that was considered enough to justify the HMP's eligibility for other bookcases that did not suffered any damage during the earthquake or after shocks.
A similar situation is used for the HMP attached to DSR 22960. In this case one light diffuser was damaged and needed replacement. One item in the HMP for this DSR contains 47 diffusers to be changed; even though they were not damaged during the earthquake or after shocks. That was the reasoning submitted for approving the remainder of the HMP.
Increase in cost for basic construction services is denied at this time. Nevertheless, if the subgrantee finds a significant overrun related to the total final cost of all its small projects, the subgrantee may submit an appeal for additional funding in accordance with 206.206, within sixty days following the completion of all its small projects.
Regarding the Mitigation Proposals' appeal, please refer to Mr. Larry Zensinger letter of May 15, 1995 addressed to Ms. Nancy Ward, where it is indicated that Hazard Mitigation under the Public Assistance Program is discretionary and is intended for purposes of reducing the potential of future damages to an eligible facility. The intent of the discretion under Section 406 is to limit mitigation funding to eligible measures under the Public Assistance Program that are directly related to the damaged elements for which reconstruction work on a facility is performed. We recognize that previous information, especially the September 16, 1994, policy statement entitled "Joint FEMA/OES Section 406 Hazard Mitigation Policy Statement" may have conveyed a more expansive interpretation on this subject. However, the Hazard Mitigation contemplated under paragraph 4 of that document (i.e. mitigation not related to actual damage) is more properly funded under Section 404 (of course, all proposed Hazard Mitigation measures are also subject to a review of cost effectiveness).
Since Paragraph 4 of the policy statement as written is in conflict with previously established FEMA policy, we can not agree to fund any proposals for Mitigation under Section 406 submitted pursuant that paragraph.
Therefore, the recommendation for the appeal of the HMP is also denial.