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Second Appeal Analysis
PA ID# 000-92004; University of North Dakota
PW ID# XXX-XXXXX; Steam Line Replacement
In April 1997 flood waters inundated a significant portion of the University of North Dakotas (Applicant) steam line system. The replacement of the underground steam distribution system was completed in two phases. The Phase I contract was the complete replacement of the steam line from the east end of the campus to the middle of campus. The Phase II contract completed the steam line from English Coulee west. The Federal Emergency Management Agency (FEMA) approved the scope of work in DSR 59315 that authorized the replacement of the system. FEMA obligated $25,417,125 for final closeout. In a letter dated September 30, 2005, the Applicant appealed FEMAs denial of $637,138.26 for costs associated with landscaping, engineering abatement, contracts, and change orders. In a letter dated August 17, 2006, the Regional Director upheld four of the 241 change orders and obligated $10,809 as reflected in DSR 64854. In a letter dated November 8, 2006, the Applicant appealed FEMAs denial of $484,373.07 for seeding and sod of the steam line trench and eight of the 241 contract change orders requested. DISCUSSION
The Applicant appeals the following change orders which are addressed below:Phase I and Phase II base contract costs for seed and sod - $399,398
In its first appeal, the Applicant appealed FEMAs denial of landscaping costs for nearly 11 miles of trenching. The costs represent final grading, topsoil, seeding/sod, and watering. The Applicant stated that FEMA improperly applied FEMA Response and Recovery Policy 9524.5, Trees, Shrubs, and Other Plantings Associated with Facilities
, dated November 25, 1997, because the policy was published after the incident period. The Applicant also argued that grass existed prior to the pipe replacement and should be replaced. The Applicant was unaware that such costs were not eligible. The Regional Director denied the landscaping costs because FEMA practice prior to and since the disaster had been to restore grass only for erosion purposes when the slope exceeded a 2:1 ratio.
In its second appeal, the Applicant reiterated its position that it was never notified that the work was ineligible. The Applicant also argued that there is no specific reference to seeding or sod in the Utilities section of the Public Assistance Guide dated September 1996. In addition, other applicants in adjacent States received funding for seeding and sod. Finally, the Applicant stated that it submitted a report reviewing the Phase I design prepared by FEMA Technical Assistance Contractors which includes restoration of the campus surface to pre-construction conditions.
The seeding and sod work was for cosmetic purposes as it did not impact essential services or the operation of the new system. The seeding and sod work is ineligible for funding under the Public Assistance Program unless there is a substantial issue of erosion. The policy prohibiting seeding and sod was developed in response to a critical report by the FEMA Office of Inspector General in 1996 and, therefore, became effective nationally prior to FEMA-1174-DR-ND. Grass and sod will not be eligible for cosmetic purposes. Based upon the documentation submitted, no areas appear to require seeding or sod for structural stability against erosion. Since the Applicant did not substantiate erosion, the Applicants request for $399,398 is denied. Phase II: Category 1, Area 1, Change Order 11 - General construction - $10,903
Change order 11 accommodated condensate pumps in several buildings. The work entailed the construction of a small room and a cabinet and countertop to isolate the condensate pumps and secure them from building occupants. This change order covers two separate buildings, the Home Economics Building ($6,940) and the Chandler Building ($3,963). FEMA denied the costs because the work was for interior building improvements.
In its first appeal, the Applicant stated that small rooms were built to accommodate the required condensate pumps. The equipment needed to be in a locked room because the hot steam could potentially burn occupants if they got too close to the pumps. FEMA denied the construction costs because FEMA considered the work to be building improvements rather than health and safety measures.
In its second appeal, the Applicant stated that the only time a small room was constructed was to house pumps located in an already finished area. The Applicant clarified that jackets were used in existing equipment rooms and reiterated that the equipment needed to be in a locked room for safety purposes due to the high temperatures of the equipment.
The change order for the Home Economics Building ($6,940) for the construction of cabinetry around the new pipe is an aesthetic modification of an improvement and not necessary for the safe operation of the system. Work to restore eligible facilities on the basis of the design of such facilities as they existed immediately prior to the disaster is eligible for Public Assistance funds. The documentation indicates that the new steam line added another entry in the southwest corner of the building. This work was beyond the original approved design. Therefore, the Applicants request for $6,940 is denied.
The change order for Chandler Building ($3,963) to construct a wall in the laundry room which separates a bank of piping and valves from the open room is necessary to address safety concerns. Although the piping is insulated, the valves and number of pipes in the immediate area and their elevation could be considered a safety issue. Therefore, the Applicants request for $3,963 is granted.Phase II: Category 4, Area 1, Change Order 5 Neenah Manhole - $890
Change order 5 changes the Neenah Manhole castings. In closeout, FEMA considered this change order a manufacturer name change. In its first appeal, the Applicant stated that the change was necessary because the 30-inch manhole was in a parking lot and flush with the pavement. This change added a second hole for air movement. The Regional Director denied the change order costs because the original manhole was within code.
In its second appeal, the Applicant stated that the change order was necessitated by code and that the manhole needed a second exit for safety purposes. In addition, the Applicant indicated that a similar change was made to the Phase I specifications for manholes 8, 9, and 10 which FEMA approved.
This change order is for adding a second entry to those approved Phase I manholes 8, 9, and 10. FEMAs regulation at 44 CFR §206.226 states that work to restore eligible facilities on the basis of the design of such facilities as they existed immediately prior to the disaster is eligible for funding. Work that changes the pre-disaster construction of a facility based upon codes and/or standards is eligible if the standards meet the requirements set forth under 44 CFR §206.226(d). This section of the regulations describes five criteria that the codes and standards must meet. The Applicant has not provided documentation demonstrating a code requirement necessitating a change in castings. Therefore, the Applicants request for $890 is denied.Phase II: Category 5, Area 1, Change Order 27 Reroute Water Line to Plant - $1,236
During closeout, the re-routing of the water line to the steam plant was funded but FEMA denied landscaping costs associated with the relocation of the Z line. In its first appeal, the Applicant maintained that FEMA mis-applied Response and Recovery Directorate Policy 9524.5, Trees, Shrubs, and Other Plantings Associated with Facilities
, because FEMA adopted it after the incident period. Since the Region conuiignificant slopes were identified in the trenched areas, the Region denied the requested landscaping costs.
In its second appeal, the Applicant stated that the line was re-routed because it was more economical to re-route than to remove trees. However, no cost analysis was performed to determine if there are increased costs or savings associated with re-routing the water line. These costs may have been eligible had the applicant performed the requisite costs analysis and the proposed change order was the more cost effective measure. The Applicants request for $1,236 is denied based on the lack of cost analysis and the FEMA policy of not funding grass or sod except for erosion control on slopes.Phase II: Category 6, Area 1, Change Order 3 Purchase additional gear and valve comp - $31,299.88
The Applicant requested costs associated with the additional purchase of a gear operator for a 14-inch valve and valve operators on 10-inch and larger valves. At closeout, FEMA denied the costs of valve operators as they were not considered necessary to operate the system. In its first appeal, the Applicant contended that the operators and associated equipment were necessary for a safer system for its workers. Although the operators may create a safer system, FEMA denied these costs because they are not required by applicable codes and standards.
In its second appeal, the Applicant stated that the valve operators were necessary so that the entire system would not be required to be shut down when a manhole developed leaks. The Applicant explained that a workman could not enter the manhole until the steam line was shut off. If a manhole did not have a shut-off, the line would need to be shut off from the nearest manholes on either side with valves, resulting in a potential shut down of a greater portion of the campus which was not desirable due to the cold climate.
The design without operators is within code. This change constitutes an improvement to the system. Therefore, the Applicants request for $31,299.88 is denied.Phase II: Category 9, Area 1, Change Order 16 Insulating beyond the tie-ins - $26,220.69
The Applicant requested $26,220.69 to insulate beyond tie-in points on various buildings. FEMA denied the costs associated with providing insulation beyond the tie-in points because it was not necessary to complete the project. In its first appeal, the Applicant maintained that the work was necessary. The Regional Director determined that the additional cost of insulation was not necessary because the base bid included insulation of new pipes.
In its second appeal, the Applicant stated that if the old pipe were insulated, the new equipment and pipe would also need to be insulated. Furthermore, the Applicant maintained that bare pipes created a safety hazard. The cost of insulating all necessary new piping was in the base bid. The costs associated with the insulation in the manholes were included in Phase I and Phase II contracts and were included in the contractors bid. If insulation was damaged during construction such that it needed to be replaced, the contractor is responsible for the costs in accordance with the contract. Therefore, the Applicants request for $26,220.69 is denied.Phase II: Category 10, Area 1, Change Order 12 Remove/dispose of asbestos from pipes - $10,208
The Applicant requested asbestos removal and disposal from inside the Altru Health Facility. At closeout and in response to the Applicants first appeal, FEMA denied the $10,208 because the Applicant did not have responsibility for the interior of the Altru Health Facility.
With its second appeal, the Applicant provided documentation showing that the removal and disposal of asbestos associated with this change order was necessary to complete the steam line and was the responsibility of the Applicant. To be eligible for Public Assistance funding, the Applicant must have legal responsibility of the damaged facility. The Applicant provided documentation that indicates that the change order was for removal of 116 feet of pipe and 116 feet of four inch condensate located outside of the building. The old pipe interfered with the placement of the new pipe. In order to complete the project, the old pipe was removed. In addition, the Applicant provided North Dakota Administrative Code 33-15-1-02.6, which requires the removal of all regulated asbestos. Therefore, the Applicants request for $10,208 is granted.Phase II: Category 10, Area 1, Change Order 13 Remove/dispose of asbestos from pipes - $3,307
The ceiling of Chandler Hall contained asbestos which had to be removed as the steam lines for the building ran above the ceiling. FEMA denied costs associated with the removal and disposal of asbestos from the pipes because the lines above the ceiling were not damaged during the event.
In its second appeal, the Applicant stated that re-routing of the line inside the building rather than through the parking lot to the tie-in was the most economical method. The Applicant provided additional drawings showing the steam and the tie-in that indicate that the reroute of the new line was approved as proposed drawing M4.22, Revision 1. Since the new line was approved as necessary for the operation of the steam line and an applicable State code requires the removal of the asbestos, the costs are eligible. Therefore, the Applicants request for $3,307 is granted.Phase II: Category 10, Area 1, Change Order 15 - Remove/dispose of asbestos from pipes - $980
The change order was for asbestos removal and disposal of a water tank located within the old tunnel system between Home Economics Building and the Steam Plant. FEMA denied these additional costs at closeout because the base contract for asbestos required removal of asbestos from tunnels. Therefore, the work was part of the contract.
In its first appeal, the Applicant clarified that the work in the change order required removal and disposal of asbestos from a water tank which was located in the tunnel. FEMA denied the first appeal because the water tank did not represent a hidden condition and was included in the base contract. The new line did not intersect this area.
In its second appeal, the Applicant stated that the tunnel area was considered a restricted area due to the asbestos contamination. The contractor did not know that there was a water tank in the tunnel prior to bidding the work because he would have had to send someone into the tunnel who was respirator certified. The Applicant submitted additional photographs that show that the tank was located in a concealed room off the main tunnel. The water tank could not have been included in the base contract as its existence was unknown.
There is no supporting documentation that this tank interfered with installing any portion of the new steam line. Additionally, the date of the pipe installation in this area was over a year before the date of the change order. Therefore, the Applicants request for $980 is denied.CONCLUSION
For the reasons discussed above, the Applicants appeal for funding of costs is partially approved Funding associated with change orders 11 ($3,963), 12 ($10,208), and 13 ($3,307) is granted.