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Second Appeal Letter
PA ID# 000-92004; University of North Dakota
DSR ID# 60254 and 74857; Additional Costs for Steam Line Repair
August 11, 2008
Lonnie G. Hoffer
Alternate Governors Authorized Representative
Office of the Adjutant General
Department of Emergency Services
P.O. Box 5511
Bismarck, North Dakota 58506-5511
Re: Second AppealUniversity of North Dakota, PA ID 000-92004Additional Costs for Steam Line Repair
Damage Survey Report (DSR) 60254 and 64857
Dear Mr. Hoffer:
This letter is in response to your letter dated January 14, 2008, which transmitted the referenced second appeal on behalf of the University of North Dakota (Applicant). The Applicant is appealing the Department of Homeland Securitys Federal Emergency Management Agencys (FEMA) denial of funding for additional costs for steam line repair on the Applicants campus.
The flood of the Red River and its tributaries in April 1997 damaged large portions of the Applicants campus. FEMA prepared DSR 59315 to replace the damaged underground steam distribution system. The Applicants contractor began work on the project on April 19, 1999. On August 29, 1999, the Applicant issued a stop-work order to the contractor, because the Applicant had not obtained the required easement to complete the project. The contractor did not work on the project from August 1999 to March 2000. The Applicants contract contained a provision that required the Applicant to pay the contractor a penalty if the Applicant stopped work on the project.
The Applicants contractor was awarded $999,999 for additional work and the work stoppage in an arbitration settlement agreement. The Applicant requested reimbursement from FEMA. FEMA reviewed the costs for the additional work and found eligible costs in the amount of $68,417 (DSR 60254). However, FEMA denied $430,408 associated with the work stoppage, because the stop-work order was issued for the convenience of the Applicant and the costs were not directly a result of the disaster. The Applicant appealed for additional funding. The Region VIII Response and Recovery Director reviewed the request, rationale, and documentation and found additional eligible costs in the amount of $21,824 (DSR 64857), but sustained the earlier decision on the costs for the work stoppage.
The Applicant filed a second appeal by letter dated January 7, 2007 [sic
2008]. The second appeal claimed the $430,408 associated with the stop-work order. The Applicant stated that the lack of easements to the Newman Center resulted in the stop-work order. The Applicant contended that the delay was a legal necessity and that since the contract explicitly entitled the contractor to damages resulting from owner-caused delays, the additional costs should be eligible FEMA costs. In addition, the Applicant stated that additional easements with third parties were needed to complete the project. The Applicant also alluded to the potential for underground conditions that could have delayed the project. However, the Applicant did not provide information to support that underground conditions were the reason for the delay.
FEMA does not dispute the fact that the contract required the Applicant to pay the contractor for any work stoppage on the project. The Applicant stopped work on the project because it did not obtain the necessary easements to complete the job. The Applicant could have avoided this action by appropriately planning for the project. Penalty costs related to non-compliance with provisions of executed contracts are not eligible for reimbursement under the Public Assistance Program. These costs were not incurred in the performance of eligible work. Therefore, the Applicants request for reimbursement of these costs is denied.
The applicant also requested $26,421 for work to adjust the grade of a steam line after the excavation trench was inundated by non-disaster related flooding. The applicant claims the damage was due to a pre-existing condition below the compacted soil. However, the information provided by the applicants architect states that the most likely cause was flooding of the trench and the construction operations. It was the contractors responsibility to protect the construction site. Therefore, this cost is not eligible for funding.
The second appeal also requested $26,024 for re-routing a steam line. We have determined this is an eligible repair cost. These costs are included in the eligible scope of work and are, therefore, eligible for funding. Accordingly, I am requesting that the Regional Administrator prepare a supplement DSR for $26,024 to implement this decision.
Please inform the Applicant of my decision. This determination is the final decision on this matter pursuant to 44 CFR §206.206.
Carlos J. Castillo
Disaster Assistance Directorate
cc: Douglas A. Gore
Acting Regional Administrator
FEMA Region VIII