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Second Appeal Analysis
PA ID# 037-91033; Los Angeles County University of Southern California
DSR ID# 13484, 03522, 46222; Cost Overruns
The Los Angeles County University of Southern California Medical Centers (Applicant) Old Administration Building was damaged in the January 17, 1994, Northridge Earthquake.
Damage Survey Report (DSR) 03522 was approved on May 19, 1994, for $15,677 to fund an Architectural and Engineering structural report (A&E report) on the facility. On July 23, 1996, the Applicant requested a supplement to DSR 03522 to fund additional costs for the A&E report based on the contracted amount of $170,111. FEMA approved DSR 46222 on January 8, 1998, for the difference of $154,434.
Based on the A&E report, damage repair DSR 02429 was approved on October 2, 1996, for $2,165,590. On November 17, 1997, FEMA made a Grant Acceleration Program (GAP) offer to the Applicant for $3,918,218 for the approved eligible scope of work described in DSR 02429. On November 24, 1997, the Applicant accepted the GAP offer. GAP DSR 13484 was approved on January 7, 1998, for $1,752,628, the difference between the eligible GAP funding and repair DSR 02429.
On August 13, 2002, the Applicant submitted a Project Completion and Certification Report (P.4). Although the Applicants backup documentation reflected total actual costs of $8,751,788, the Applicant claimed $4,263,710 for the damage repair and approved improvement work. Previously approved funding totaled $4,088,329 (GAP offer plus 2 A&E DSRs), resulting in a claimed cost overrun of $175,381. The overrun consisted of $52,635 for repair work and $122,746 for the A&E report ($110,277 project management, $4,941 asbestos survey and $7,528 reproduction costs).
By letter to the California Office of Emergency Services (OES) dated March 4, 2003, FEMA denied the cost overrun. The Notice of DSR Approvals and Project Determinations provided, as follows:
will be limited to the estimated cost ($4,088,329) associated with completing the approved scope of work. Although the Subgrantees claim for repairs is $52,635 more, it is not clear that these costs are directly attributable to previously approved scopes of work or for improvements; therefore, the overrun in repair cost is not eligible. The remaining balance of claimed overrun costs is attributed to the structural evaluation report and project management. These costs are also indistinguishable in relation to the approved scope of work performed and are also ineligible for funding.
By letter dated June 18, 2003, OES transmitted the Applicants first appeal letter, dated April 23, 2003, of FEMAs determination to disallow $175,381 in claimed overruns. The Applicant submitted change orders and a scope reconciliation chart with the appeal which reflected $8,458,921 in total project costs which included the $52,636 overrun. The Applicant claimed that only $967,135 of the total project costs was related to ineligible work. FEMA denied the appeal on December 7, 2004. The A&E costs were denied on the basis the Applicant did not submit reconciliation documentation within the 90-day time frame. The $52,636 repair cost overrun was denied because FEMA could not determine from the documentation submitted if the costs incurred were spent on eligible repair work or approved improvements.
The appeal analysis also noted that, even if the overrun attributable to the approved improved project could be determined, it would not be eligible for offset by GAP underruns. Pursuant to the Audit of the GAP by FEMAs Office of Inspector General, the use of GAP underrun funds to offset GAP improved project overruns is not allowed. However, if sufficient documentation were submitted to enable FEMA to determine the nature of all the work performed, it might be possible to re-characterize the improvements as either work associated with the damage repair work or hazard mitigation work, which would be eligible for offset by GAP underrun funds. Before FEMA could undertake such a re-evaluation, however, the Applicant would first have to request a withdrawal of the improved project designation from OES. On March 8, 2005, the Applicant made a request to OES to rescind the improved project status. OES approved the request and transmitted its approval to FEMA by letter dated March 17, 2005.
The Applicant appealed the denial of the A&E report and repair cost overruns totaling $175,381 by letter dated March 18, 2005. OES transmitted the appeal to FEMA on May 17, 2005. The Applicant claims it is eligible for the A&E costs because it submitted a A&E Evaluation Project Cost Sheet in November, 1996, prior to the 90-day deadline of February 17, 1998. In addition, regardless of whether the additional documentation was submitted in a timely manner, the Applicant claims it is eligible for project management costs equal to 30% of the eligible A&E costs ($170,111 x 30% = $51,033), consistent with FEMAs practice with respect to other A&E closeout DSRs. The Applicant cited six representative DSRs. Regarding the repair overruns, the Applicant claims that the additional work submitted as part of the improved project request was inappropriately designated as improvements.
A&E: The GAP settlement offer, dated November 17, 1997, specifically stated that the scope of work covered by DSRs 03522 and 46222 was not included in the GAP offer and that, if accepted, the non-GAP DSRs were required to be closed out under the standard DSR process within 90 days of the date of the letter. The Applicant was requested to submit remaining documentation to OES to facilitate the closeout. The Applicant, in transmitting its acceptance of the GAP offer to OES, stated that the remaining documentation for the two DSRs would be submitted by February 15, 1998, within the 90-day time deadline. The Applicant did not submit additional documentation with respect to the two A&E DSRs, nor did the Applicant request final closeout of these DSRs. It was FEMAs practice, once a timely request was made, to provide funding for project management costs equal to 30% of the eligible A&E costs. Final reconciliation of the A&E costs, including the balance of the project management costs, would occur at closeout on the basis of a review of the supporting documentation. The six DSRs cited in the Applicants second appeal were reviewed and it was found that, in four of the cases, the Applicant made timely requests for reconciliation of costs and FEMA funded the 30% project management cost. For the other two DSRs cited by the Applicant, no request for reconciliation was made, and no project management funds were granted.
The Applicant also stated that it provided the A&E Evaluation Project Cost Sheet (revised 11/21/96) to FEMA directly. There is no record that this document was ever provided to FEMA or made a part of the record. Notwithstanding, the additional costs mentioned in this document appear unrelated to the additional costs claimed on appeal (i.e. $110,277 project management, $4,941 asbestos, $7,528 reproduction costs). If the Applicant was seeking reimbursement for these costs, no follow up request, inquiry or appeal was ever made with respect to FEMAs failure to fund them. Additionally, FEMAs denial of the July, 1996, Request for Supplemental Funding was never appealed. The request for additional funding was received over four years beyond the submission deadline. The Applicant has not demonstrated extenuating circumstances to justify such a delay.
Repair overruns: On January 22, 1998, the Applicant requested improved project status for the approved scope of work in the GAP funding DSR 13484. The improvements included mechanical, electrical and plumbing (MEP) upgrades, landscaping work and measures required by the Americans with Disabilities Act (AD 1 a request to OES to rescind the improved project status. OES approved the request and transmitted its approval to FEMA by letter dated March 17, 2005.
In segregating the work into FEMA eligible and ineligible work, the Applicant included MEP upgrades as eligible work. MEP upgrades constitute improvements, which became ineligible when OES granted the Applicants request to rescind its improved project status.
In accordance with the GAP settlement offer, which the Applicant signed on November 24, 1997, reconciliation of the actual costs for the A&E report was to be submitted within 90 days of acceptance of the offer. No reconciliation documentation was submitted to FEMA by this deadline; therefore, funding for the structural evaluation/A&E report is limited to the previously approved amount of $170,111.
Furthermore, the Applicant did not provide on first or second appeal documentary evidence sufficient to support its claim that the repair cost overruns are directly related to the approved work. Accordingly, the appeal is denied.