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Second Appeal Letter
PA ID# 037-91025-00; Los Angeles County Department of Health Services
DSR ID# 60569; Torrance Health Center
January 11, 2010
Governor’s Authorized Representative
California Emergency Management Agency
Response and Recovery Division
3650 Schriever Avenue
Mather, California 95655
Re: Second Appeal–Los Angeles County Department of Health Services, PA ID 037-91025-00,
Torrance Health Center, FEMA-1008-DR-CA, Damage Survey Report (DSR) 60569
Dear Mr. McCarton:
This is in response to your letter dated December 1, 2008, which transmitted the referenced second appeal on behalf of the Los Angeles County Department of Health Services (Applicant). The Applicant is requesting that the Department of Homeland Security’s Federal Emergency Management Agency (FEMA) reconsider its treatment of costs for construction administration for the Torrance Health Center as project management soft costs.
Following the Northridge earthquake on January 17, 1994, the Applicant accepted a Public Assistance Grant Acceleration Program (GAP) offer for $287,862 to repair the Torrance Health Center. At closeout, FEMA determined $25,471 in costs claimed for Architectural and Engineering (A&E) construction administration services were excess project management costs and not eligible for reimbursement. The Deputy Regional Administrator sustained this determination on first appeal in a letter dated August 19, 2008. The Applicant submitted a second appeal on October 8, 2008.
The Applicant argued that FEMA mischaracterized $25,471 as project management costs (soft costs) when the costs were directly related to construction design and engineering services (hard costs). The total amount in dispute is $29,546 ($25,471 in part A costs plus $4,075, the 16 percent allowance for project management costs attributable to the increase in part A costs). The Applicant’s support documents included a copy of the A&E Services Agreement and a Subgrantee Summary of Expenditures, A&E Construction Administration. The summary of expenditures lists categories of work with corresponding vendor names, job invoice numbers and service fees. However, the Applicant did not provide vendor invoices that identify the actual A&E (hard costs) services performed and the fees associated with those services to support its claim.
The approved GAP funding for the Torrance Health Center contained a limit on project management costs (soft costs). In 1999, FEMA approved construction administration as a project management cost in the GAP settlement offer pursuant to the Northridge GAP Cost Estimating Format (CEF) Guide. In 2000, FEMA and Los Angeles County agreed to caps on the County’s claims for project management costs because FEMA determined the County’s initial claims for project management costs were excessive. FEMA did not place caps on construction costs (hard costs). For the Torrance Health Center project, the Applicant exceeded the approved project management costs and claimed construction administration costs as hard costs at closeout. However, the Applicant did not submit a description of the specific tasks performed under the A&E construction administration that would justify their treatment as hard costs. In absence of documentation that the construction administration costs were hard costs, it is appropriate, and consistent with the GAP CEF Guide, to treat these costs as project management costs. It is also appropriate to address these costs during closeout in the same manner they were treated in the GAP settlement offer. Therefore, FEMA considers the $29,546 in construction administration costs to be excess project management costs. These costs are not eligible for reimbursement.
I have reviewed all information submitted with the second appeal and have determined that the questioned costs are appropriately characterized as project management soft costs pursuant to GAP guidelines and the documentation submitted. Therefore, I am denying the second appeal.
Please inform the Applicant of my decision. This determination constitutes the final decision on this matter pursuant to 44 CFR §206.206, Appeals.
Elizabeth A. Zimmerman
Disaster Assistance Directorate
cc: Nancy Ward
FEMA Region IX