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Second Appeal Letter
PA ID# 103-70805-00; City of Slidell
PW ID# 15510; Cleaning Storm Drains
March 24, 2009
Colonel Thomas Kirkpatrick (Retired)
State Coordinating Officer
Governor’s Office of Homeland Security
and Emergency Preparedness
415 North 15th Street
Baton Rouge, Louisiana 70802
Re: Second Appeal–City of Slidell, PA ID 103-70805-00, Cleaning Storm Drains,
FEMA-1603-DR-LA, Project Worksheet (PW) 15510
Dear Colonel Kirkpatrick:
This letter is in response to your letter dated July 11, 2008, which transmitted the referenced second appeal on behalf of the City of Slidell (Applicant). The Applicant appealed the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) decision to deny the Applicant’s request for an additional $1,142,752 for cleaning the Applicant’s storm drainage system.
Hurricane Katrina severely damaged and deposited vast amounts of debris into the Applicant’s storm drainage system. In January 2006, the Applicant advertised a Request for Qualifications and requested Statements of Qualifications from three firms, including the Applicant’s existing contractor Montgomery Watson Harza (MWH). Based on a lack of interested and/or qualified firms, the Applicant selected MWH to perform the work. The Applicant requested $5,372,305 in reimbursement from FEMA for the cost to clean the storm drainage system. FEMA reviewed the Applicant’s request and determined that the Applicant used a cost-plus-percentage-of-cost contract, which is prohibited by 44 CFR §13.36. In addition, FEMA determined that the costs were unreasonable. FEMA utilized a cost reasonability model to determine the allowable cost for the work performed. FEMA approved only $3,129,117 for the project.
In its first appeal, the Applicant maintained that the contract was not a “cost plus” agreement, but rather a “cost agreement with a percentage based fee.” In addition, the Applicant argued that FEMA neglected several factors in determining reasonable cost. In the first appeal response, dated March 4, 2008, the Regional Administrator agreed with the Applicant’s argument that all unit costs except for the open ditch cleaning of $5.95 per linear foot were reasonable and approved an additional $1,100,436. The Regional Administrator determined that it was reasonable to use the unit price of $3.40 per linear foot as established in FEMA’s cost codes.
The Applicant submitted a second appeal on March 4, 2008, requesting an additional $1,142,752 to cover the total cost of the drainage system cleaning contract. The Applicant maintained that its costs meet the Office of Management and Budget’s definition of reasonable cost, and that FEMA’s method for determining that the unit price was unreasonable was flawed.
The Applicant’s contract with MWH states in pertinent part, “The work shall be billed by quantities completed using the unit costs identified above and shall be invoiced at the approved Federal Year 2005 billing rates…including 10 percent profit on all costs.” It also includes a not-to-exceed provision. The Applicant negotiated the contractor’s profit based on the total cost of the work that the contractor was to perform. Since the contract contained a cost ceiling, it is not considered a cost-plus-percentage-of-cost contract.
On October 20, 2008, the Director of the Public Assistance Division met with the Applicant and the State Coordinating Officer to discuss the appeal. The Applicant provided additional information and backup documentation including a cost analysis to substantiate its unit price of $5.95 per linear foot for open ditch cleaning. We have reviewed costs for similar work following Hurricane Katrina and the unit cost used to develop FEMA’s estimate and have determined that the Applicant’s contract costs are reasonable. Accordingly, the appeal is approved. By copy of this letter, I am requesting that the Regional Administrator take appropriate action to implement this determination.
Please inform the Applicant of my decision. This determination is the final decision on this matter pursuant to 44 CFR §206.206.
James A. Walke
Acting Assistant Administrator
Disaster Assistance Directorate
cc: Gary Jones
Acting Regional Administrator
FEMA Region VI
Louisiana Transitional Recovery Office