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Second Appeal Analysis
PA ID# 059-00EE2-00; Moss Point School District
DSR ID# Project Worksheets 4649, 8074, 8254, and 10844; Magnolia Junior High School
The campus of Magnolia Junior High School comprises two buildings: a one-story, 78,456-square foot (SF), four-wing main building housing classrooms, administrative offices, gym and library; and, a one-story, 5,100-SF cafeteria. On August 29, 2005, storm surge from Hurricane Katrina inundated the main building and reached a depth of 40 inches in one wing. The cafeteria received nearly 25 inches of storm surge. Receding waters deposited mud, wet debris and lift station contents throughout the facility. Students were relocated to Ed Mayo Junior High School and the Magnolia Junior High School facilities have been vacant since the storm.
The Moss Point School District (Applicant) signed a time and materials contract for cleanup and mold remediation with Blackmon-Mooring Steamatic Catastrophe, Inc. (BMS) on September 11, 2005, and the work proceeded through December 6, 2005. FEMA prepared Project Worksheet (PW) 4649 as Category B for $982,737 for contract costs related to removing debris and water , dehumidifying, sanitizing, removing and/or cleaning of contents, and removing wet drywall, cove base, and carpet. During the review process, FEMA changed PW 4649 from Category B to Category E based on interpretation of disaster-specific guidance (DSG) on mold remediation. FEMA prepared PW 8074 for $1,688,076 for repairs to the main building and PW 8254 for $122,687 for repairs to the cafeteria. Response and Recovery Directorate Policy 9524.4 Eligibility of Facilities for Replacement under 44 CFR 206.226(d)(1) (The 50% Rule)
, dated September 24, 1998, allows FEMA to fund the replacement of a facility if the cost to repair the disaster damages equals or exceeds 50 percent of the cost to replace the facility. FEMA calculated the repair versus replacement ratio to be 26 percent for the main building and 29 percent for the cafeteria. FEMA did not include work captured in PW 4649 in The 50% Rule analysis.First Appeal
The Applicant submitted its first appeal of PWs 4649, 8074, and 8254 to the Mississippi Emergency Management Agency (MEMA) in a letter dated March 12, 2007. MEMA forwarded the appeal to FEMA in three separate letters dated April 18, 2007. In the appeal, the Applicant identified four areas where the scope of work on PWs 8074 and 8254 was deficient: (1) electrical, (2) HVAC, (3) mold and moisture, and (4) architect fees. The Applicant explained that the City will not issue a building permit unless repairs incorporated code upgrades for electrical, HVAC, and interior stud partition walls. The Applicant also contended that remediation work from PW 4649 should be included as Category E in The 50% Rule analysis as it has been with other applicants. The Applicant claimed that with all work included, the resulting repair versus replacement ratio is 51.7 percent (for both buildings combined), and requested funding for replacement buildings.
The Regional Administrator denied the Applicants claim that remediation work should be considered in the 50% Rule analysis in a letter dated July 19, 2007. The appeal response stated that the mold remediation work was properly categorized as emergency protective measures because the intent of the work was to remove health and safety hazards and prevent further damage to public property. The appeal response explained that emergency work is not included in the 50% Rule analysis pursuant to FEMA policy.
FEMA deobligated Category E PW 4649 and obligated two other PWs to allocate work under appropriate categories. FEMA obligated Category B PW 10844 for $971,934 and a version of Category E PW 8074 for $10,803.
FEMA verified the eligibility of the additional scope of work that the Applicant requested and increased funding to completely replace the schools electrical system, provide additional HVAC systems, replace a master intercom system, increase A/E fees, and complete other miscellaneous repairs. The increased scope of work added $649,495 to estimated costs on PW 8074 and $81,663 to PW 8254. In total, Version 3 of PW 8074 provides estimated repair costs of $2,530,232 (reduced by $68,420 for anticipated insurance proceeds) and Version 3 of PW 8254 provides $236,571 (reduced by $59,143 for anticipated insurance proceeds).
FEMA performed another 50% Rule analysis for each building after increasing eligible repair scope of work and costs. At that time, a FEMA cost estimator determined that the original square-foot replacement cost of $83.45/SF for both buildings was not consistent with RS Means or current local bid prices. FEMA determined that the RS Means Square Foot Models replacement costs of $89.82/SF for the main building and $122.54/SF for the cafeteria were more appropriate. The resulting repair versus replacement ratio was 36 percent ($2,530,232/($89.82*78,456 SF)) for the main building and 38 percent ($236,571/($122.54*5,100 SF)) for the cafeteria. Because replacement was not warranted for either building based on the 50% Rule, the Applicants appeal for replacement was denied.Second Appeal
The Applicant submitted its second appeal to MEMA on September 26, 2007, and MEMA forwarded the appeal to FEMA on November 29, 2007. The appeal does not dispute scope of repair work or cost estimates on PWs 8074, 8254, and 10844. No new information is presented beyond that available in the first appeal. However, the Applicant maintains that funding for replacement is eligible based on the proper application of the 50% Rule. The Applicant claims that the mold remediation work captured in PW 10844 should be included in the 50% Rule analysis because it considers this work to be permanent repair (Category E). The Applicant stated that the two building should be considered one project and the repair versus replacement ratio for both buildings combined is 51.8 percent. The Applicant requests an additional $3,250,000, which represents the difference between repair and replacement of the buildings.
MEMA supports the Applicants appeal and argues two primary issues: (1) mold remediation on PW 10844 should be included in repair costs for the 50% Rule analysis, regardless of the category of work; and (2) it was unfair for FEMA to modify the replacement cost used in the 50% Rule analysis as a result of the Applicants first appeal.
The Applicant also identifies three cost items that it claims were omitted from the repair costs: (1) completed work in PW 8074 ($131,971), (2) reduction for anticipated insurance proceeds in PW 8074 ($-5,010), and (3) exhaust hood replacement in PW 8254 ($29,884). Items 1 and 3 are added (both as positive values) to repair costs on Attachment 1 of MEMAs transmittal letter. Repair costs (items 1 and 3) were included in FEMAs calculation of The 50% Rule. Additionally, item 2 was reinstated in PW 8074 version 3; therefore, was included in the calculations.DISCUSSION
There are three primary issues to address in the Applicants second appeal: (1) should mold remediation completed at this facility be funded under Category B or Category E? (2) should Category B work be included in The 50% Rule analysis? and (3) was it appropriate for FEMA to revise the replacement cost used in The 50% Rule analysis in response to the Applicants first appeal? Each of these issues is discussed below.Category B versus Category E
Mold remediation may be eligible, either as an emergency protective measure in the immediate aftermath of a disaster, or as part of permanent repair work. Disaster-specific guidance (DSG) describes work that is eligible under Category B or Category E. According to the DSG, remediation is funded under Category B when activities are performed to stop the spread of mold and to prepare for repair/restoration. To the extent necessfand carpet, wet vacuuming, damp wiping, and High Efficiency Particulate Air (HEPA) vacuuming are eligible under Category B.
The DSG states that mold remediation is considered Category E when access to the facility was not immediately available and it is found that mold has already invaded most of the facility and any remediation to stop further damage will have negligible effect. In this scenario, remediation is not necessary to prevent further damage to the facility or eliminate an immediate threat to public health. Accordingly, this work would not be eligible as emergency protective measures. However, remediation may be completed as part of permanent repair of disaster damage and funded under Category E.
It is clear that remediation work completed at Magnolia Junior High School was necessary to eliminate or reduce an immediate hazard threatening further damage to the facility. The BMS contract stated that residual water from the disaster was absorbing into walls, ceilings, and other hygroscopic materials and that mold was growing at a rapid pace. This observation reveals that water was wicking up in building materials and there was significant potential for mold growth in previously unaffected areas of the facility. The scope of work on the BMS contract included removing drywall 18 above the water line, or further if mold was found. The Applicant took prudent measures to quickly enter into a remediation contract to protect public health and prevent additional damage to the facility. This work is eligible under Category B.
The Applicant claims that remediation should be Category E because the school was boarded up and abandoned for an extended period of time before remediation began. It appears that the Applicant is appealing to the DSG, which states that remediation work is not eligible under Category B when a facility has been boarded up and abandoned for an extended period of time. The DSG does not indicate that this work is automatically eligible under Category E. There is no evidence to support the Applicants assertion that the school was abandoned for a significant period of time before remediation work began. The disaster occurred on August 29, 2005. By September 11, 2005, the Applicant signed a contract with BMS for immediate cleanup and mold remediation activities. MEMA asserts that to the extent the DSG
characterizes these cleanup and remediation costs as Category B measures, it is clearly inconsistent with the PA Guide. The DSG expands upon basic eligibility criteria presented in the PA Guide regarding emergency protective measures and permanent work and explains how mold remediation fits within these criteria. Measures taken to protect public health and prevent further damage to a facility are recognized as emergency protective measures in both the DSG and the PA Guide.
MEMA argues that funding remediation under Category B and excluding these costs from the 50% Rule analysis would deter prompt remediation and encourage Applicants not to act quickly to minimize damage from mold propagation. In accordance with PA policy, if an Applicant fails to take reasonable measures to prevent the spread of mold, rehabilitation and repair of additional contaminated area will not be eligible under any category of work.Category B and The 50% Rule
Emergency work is not considered in The 50% Rule analysis. In accordance with 44 CFR 206.226(d)(1), A facility is considered repairable when disaster damages do not exceed 50 percent of the cost of replacing a facility. The 50% Rule policy states that the numerator in this calculation is the cost of repair of the disaster damage only. Repair of disaster damage is work necessary to restore a facility on the basis of its predisaster design. This work is, by definition, permanent work. Emergency work eliminates or reduces threats to a facility, but does not encompass permanent repair of disaster damage to the facility, and is not considered in The 50% Rule analysis.Replacement Cost Estimate
MEMA objects to the use of a higher replacement cost for The 50% Rule analysis in response to the Applicants first appeal. The appeal argues that Applicants will be unfairly discriminated against if revised estimates are applied only to Applicants who appeal. The appeal does not claim that the revised replacement cost used by FEMA is unreasonable; only that it was unfair to revise the estimate. MEMA states that source data for the revised costs are not provided and it expresses concern that the estimates appear to be subjective and judgmental.
FEMA ensures that reasonable costs are applied in all funding decisions. As a result of the Applicants first appeal, FEMA used a professional cost estimator to prepare estimates for the new eligible scope and to perform another 50% Rule analysis. The cost estimator determined that the original cost per square-foot value was not reasonable for the subject buildings. It was found that the estimate was not consistent with RS Means or current local bid prices. The value ($83.45/SF) was based on preliminary estimates provided by the FEMA/MEMA team early in the disaster and applied to both buildings without consideration of scale, configuration, use, or finishes. For example, a small building will generally cost more per square foot than a large building of similar construction. However, the same cost per square foot was used for the cafeteria (5,100 SF) as the main building (78,456 SF).
FEMA is required to use the most accurate cost data available at the time cost estimates are prepared. The cost estimator developed comprehensive replacement estimates based on RS Means Cost works Square Foot Models. Source data and assumptions are on file at the Region IV office. FEMA prepared estimates for each wing of the main building and the cafeteria separately based on different finishes and system requirements. For example, cafeteria costs reflect ceramic tile flooring, vinyl coated ceiling tile, additional gas and electrical connections for cooking; walk-in freezer, walk-in cooler, and a fire-suppression system. The following table shows results of the square-foot model for each area of the facility:
The estimates were prepared using industry standard methodology, checked against current local bid prices, and ar>