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Third Appeal Analysis
PA ID# 071-59962; City of Santa Monica
DSR ID# 76720,22960; Engineering and Design Services
In 1992, the Northridge Earthquake caused various damages throughout the City of Santa Monica (subgrantee). Consequently, the Federal Emergency Management Agency (FEMA), California Governor's Office of Emergency Services (OES), and local representatives prepared damage survey reports (DSRs). In particular, inspectors prepared DSRs 76720 and 22960 to cover repair of minor architectural damage at the Montana Library and Clover Park Administrative Building, respectively. The scopes of work for these DSRs included patching and painting cracked wallboard, repair of a bookcase and door, and replacement of a light diffuser. In addition, the inspectors' recommendation included an allowance for construction inspection and engineering and design services. The subgrantee submitted a Hazard Mitigation Proposal (HMP) with each DSR for various non-structural mitigation measures.
During review of these DSRs, FEMA determined that engineering and design services were not required to perform the approved repairs. Therefore, FEMA reduced the eligible funding and approved DSR 76720 for $2,444 and DSR 22960 for $3,841. In addition, FEMA determined that the HMPs were not eligible because the work was not related to protection of the elements that were damaged during the earthquake.
The subgrantee submitted first appeals to OES with letters dated December 23, 1994. In their appeals, the subgrantee requested that FEMA reconsider funding of engineering and design services because they contended that these costs were incurred as a direct result of the disaster. In support of this request, the subgrantee explained that the work associated with DSRs 76720 and 22960 was performed under a $1.2 million contract that included 33 other damaged facilities. In addition, the subgrantee asserted that if FEMA would evaluate the cost-effectiveness of the HMPs, the work would be determined eligible. By letter dated August 9, 1995, the Federal Coordinating Officer (FCO) denied the subgrantee's first appeals. The FCO determined that the type of work performed under DSRs 76720 and 22960 did not require engineering and design services. In addition, the FCO stated that the subgrantee did not establish that the HMPs were related to the damaged elements of the facility and that, therefore, the HMPs were not eligible.
On January 19, 1996, OES forwarded the subgrantee's second appeals to the Executive Associate Director. In their appeals, the subgrantee restated their position from the first appeal. The Executive Associate Director denied the appeal with a letter dated March 24, 1997. In this letter, he stated that the HMPs were not related to the elements damaged during the disaster and that the subgrantee did not establish that the repairs of disaster-related damages were complex enough to require engineering and design services. Further, he stated that increased costs for inspection services would only be considered as part of an overall adjustment if the total of all small project costs was greater than the estimate.
On September 12, 1997, OES transmitted the subgrantee's third appeals to FEMA. In these appeals, the subgrantee does not dispute FEMA's determination that the HMPs are ineligible. However, the subgrantee states, "Any project requiring construction would logically require some engineering and design services to prepare them for the formal bidding process." The subgrantee has submitted a list of DSRs, which they contend establishes that FEMA funded engineering and design services for work similar to the approved repairs. In addition, the subgrantee submitted their actual construction costs, engineering and design costs, and "construction management" (i.e., inspection services) costs that they believe are attributable to each DSR.
Construction Inspection Services
In addition to engineering and design services, the subgrantee is requesting additional funding for inspection services related to the work approved under DSRs 76720 and 22960. Because these DSRs are considered "small projects", FEMA will only consider additional funding for increased costs of inspection services as part of an overall adjustment if the total inspection costs of all small projects are greater than the estimated inspection costs. Therefore, the subgrantee's request for increased funding of "construction management" costs is denied. However, if the subgrantee discovers an aggregate cost-overrun for construction inspection services (or any other item), they may submit an appeal for additional funding within 60-days of the completion of all of its small projects in accordance with 44 CFR 206.204(e).
Engineering and Design Services
Technical services associated with a construction project may be eligible for Public Assistance funding. Typically, these services consist of preliminary engineering analysis, preliminary design, final design, and construction inspection. To estimate these costs on a DSR, such costs are generally based upon a percentage of the estimated total construction cost. However, the inclusion and subsequent approval of such costs must be justified by the nature of the work and is determined on a case-by-case basis. Further, if FEMA determines that such costs are not required for the approved repairs, the subgrantee must submit detailed information to establish how the costs are directly related to the eligible scope of work.
The subgrantee's request for funding of engineering and design services is predicated on the fact that such costs were incurred under a contract that was let by the subgrantee for restoration of 34 facilities damaged during the disaster. Essentially, they claim that the total cost of engineering and design services for this contract should be funded as a pro-rated cost under each DSR associated with the contract. However, as previously stated, it is the nature of the repair that justifies the need for professional engineering and design services.
In support of their assertion that FEMA has "long acknowledged the eligibility of activities associated with a formal public works construction project," the subgrantee references (1) a FEMA document entitled "Order of Documents in a DSR", (2) several DSRs that were previously approved by FEMA, and (3) engineering cost estimating curves from the Public Assistance Guide. FEMA's response to these references is as follows:
- The referenced FEMA document is distributed to inspectors as a guide for preparing DSRs. The document states that eligible direct costs may include architectural/engineering services necessary (emphasis added) for eligible work. Thus, the eligible work must have a level of design complexity that makes it necessary to procure engineering and design services.
- FEMA has funded engineering and design services, but only for projects that required such services. Further, eligibility for Public Assistance is based on the particular circumstances associated with each DSR.
- The referenced cost estimating curves are used to determine the amount of eligible funding for engineering and design services based on the estimated total construction cost. However, as stated above, FEMA has funded engineering and design services, but only when such services are required.
The subgrantee has not established that the work necessary to repair the disaster-related damage identified in DSRs 76720 and 22960 requires the services of an engineer or design professional to facilitate the repair. Furthermore, the documentation provided by the subgrantee does not indicate that the requested funding is related to repair of the damaged facilities, but rather it indicates that expenses were incurred under a contract for repair of numerous damaged locatioris approved under DSRs 76720 and 22960.
The subgrantee's request for additional funding for construction inspection services is denied. However, if the subgrantee discovers an aggregate cost-overrun for construction inspection services (or any other work item), they may submit an appeal for additional funding within 60-days of the completion of all of its small projects in accordance with 44 CFR 206.204(e). Further, the subgrantee has not established that the work necessary to repair the disaster-related damage identified in DSRs 76720 and 22960 requires engineering and design services. As such, engineering and design services are not eligible for Public Assistance funding for these DSRs and the third appeal is denied.