Appeal Brief | Appeal Letter | Back
Second Appeal Letter
PA ID# 099-07300-00; City of Boca Raton
PW ID# 870; Debris Removal City-Wide
August 2, 2012
Florida Division of Emergency Management
2555 Shumard Oak Boulevard
Tallahassee, Florida 32399-2100
Re: Second Appeal–City of Boca Raton, PA ID 099-07300-00, Debris Removal City-Wide, FEMA-1609-DR-FL, Project Worksheet (PW) 870
Dear Mr Koon:
This letter is in response to a letter from your office dated February 23, 2011, which transmitted the referenced second appeal on behalf of the City of Boca Raton (Applicant). The Applicant is appealing the U.S. Department of Homeland Security’s (DHS) Federal Emergency Management Agency’s (FEMA) denial of $4,788,258 in funding for the cost of debris removal after Hurricane Wilma.
The U.S. Department of Homeland Security’s Office of Inspector General (OIG) issued an audit report (DA-09-06) on December 8, 2008, that concluded the Applicant did not satisfy the Federal grant procurement requirements in 44 Code of Federal Regulations (44 CFR) §13.36, Procurement. Specifically, 44 CFR §13.36(f)(1), Contract cost and price, requires applicants to perform a cost analysis in connection with every procurement action, including contract modifications.
In May 2004, the Applicant utilized a competitive process to procure a contract for debris removal services. The rate for the services was $19.35 per cubic yard (CY) for collection, hauling, processing, and disposal of debris. The cost for hazardous stump removal was considered separately on a per item basis, depending on the size of the stump. In September 2004, the Applicant accepted a modification to the contract that increased the rate to $19.50 per CY. In October 2005, after Hurricane Wilma, the Applicant accepted a second modification that increased the rate to $28 per CY. As part of the modification, hazardous stumps, trees and limbs were invoiced on a cubic yard basis as general vegetative debris, as opposed to being tracked separately.
The DHS OIG’s audit determined that the Applicant’s modification of its May 2004 debris removal contract in September 2004 and again in October 2005, did not comply with Federal regulations to ensure that the Applicant obtained a fair and reasonable price for the contracted debris removal services. Therefore, the OIG questioned $5.2 million in funding. As a result of the DHS OIG’s audit and a final inspection, FEMA determined that a total of $11,447,735 was eligible for reimbursement.
The Applicant submitted its first appeal on January 20, 2010. The Applicant contended that it performed a cost analysis using historical debris volume data. According to the Applicant, the modifications resulted in a “cradle to grave” cubic yard (CY) cost that was reasonable and consistent with FEMA’s guidance. However, FEMA determined that these modifications increased the CY price from $19.35 per CY to $28 per CY and changed the methodology used to determine debris volumes. The initial contract determined vegetative debris volumes after the debris was reduced. The modified contract based debris volumes on the quantity of unprocessed debris. FEMA also noted that the Applicant included costs for hazardous limbs, trees and stumps in its analysis without including the amount of debris generated by that work, resulting in an inflated per CY rate. Moreover, the Applicant contracted with another vendor during the event at a rate of $12.50 per CY to collect and haul vegetative, and construction and demolition debris, which was consistent with the rate ($12.75 per CY) for collection and hauling of debris under the original version of the contract in question.
As a separate matter, as part of the first appeal, FEMA resolved potential duplication of benefits for debris removal funding provided under the Federal Highway Administration’s Emergency Relief program. FEMA determined that a portion of the debris was eligible for Public Assistance funding. Subsequently, the Regional Administrator partially approved the Applicant’s first appeal on October 14, 2010, and granted an additional $612,203 in funding.
The Florida Division of Emergency Management (Grantee) submitted an appeal on the Applicant’s behalf on February 23, 2011. The Grantee acknowledged the issues with regard to the contract modifications, and concluded that the pertinent issue for the appeal is establishing reasonable cost. To establish reasonable cost for debris removal work, the Grantee cited work conducted in the City of Deerfield Beach, a neighboring jurisdiction, in the same event. In this case, the Grantee argued that the City of Deerfield Beach used a contractor to remove 355,396 CY of vegetative debris at a rate of $29 per CY following Hurricane Wilma, which established this rate as being reasonable.
In the second appeal, the Grantee stated that the comparable rate paid by the City of Deerfield Beach, a neighboring jurisdiction, was also $29 per CY for debris removal. However, time and equipment (T&E) contract costs were incorrectly included in that calculation. The actual rate paid by the City of Deerfield Beach was $15.00 per CY to pick-up and haul debris, and $7.95 per CY for disposal, resulting in a total rate of $22.95 per CY to remove and dispose of 378,636 CY of debris. Before being modified, the Applicant’s contract was based on a rate of $19.35 per CY to pick-up, haul, process and dispose of debris. The Applicant’s original contract rate is similar to that of its neighboring jurisdiction for comparable work.
While the modifications to the Applicant’s contract increased the rate to $28 per CY, it should be noted that the new rate reflected an expanded scope of work which included removal, transport and disposal costs, as well as hazardous stump, tree and limb removal in the CY rate. The Applicant has referenced the modification as a “cradle to grave” rate for debris removal. FEMA typically refers to “cradle to grave” contracts or rates as encompassing the various steps in the debris removal process, to include pick-up, hauling, processing (reduction), and disposal of debris. In the case of the Applicant, the contract modifications not only provided “cradle to grave” services for these various phases of debris removal, but it also included additional work for hazardous stumps, trees and limbs in what the Applicant referred to as a “blended” rate.
The use of a “blended” CY rate is problematic for the following reasons. The rate of $28 per CY includes hazardous stump, tree and limb work which is typically tracked and invoiced on a per unit basis, as was the case for hazardous stumps in the Applicant’s original contract. By increasing the CY rate to account for the more complex and expensive work of clearing hazardous stumps, trees and limbs, the higher CY rate was applied to less complex and lower cost work of picking-up and hauling debris from rights of way. Additionally, because of the “blended” rate, hazardous tree and limb work was not tracked separately. While the DHS OIG was able to account for hazardous stump removal in its audit report based on information with regard to stump removal, similar information is not available for hazardous trees and limbs. It is therefore not possible to determine how much debris this work generated or the costs associated with this work. It is also not possible to verify the eligibility of this work. For example, as part of the Appeal, the Applicant provides information on hazardous tree work related to the clearance of debris from canals. However, Boca Raton is located in the Lake Worth Lagoon – Palm Beach Coast Watershed. Clearance of debris from waterways located in watersheds primarily falls under the authority of the Natural Resources Conservation Service (NRCS), and it is therefore not eligible for FEMA Public Assistance funding. Based on the information provided in the second appeal, the higher rate of $28 per cubic yard under the Applicant’s modified contract is not substantiated as being reasonable.
I have reviewed the information submitted with the appeal and have determined that the Regional Administrator’s determination in the first appeal is consistent with Public Assistance Program regulations and policies. I am therefore denying the second appeal. Please inform the Applicant of my decision. This determination is the final decision on this matter pursuant to
44 CFR §206.206, Appeals.
cc: Major P. May
FEMA Region IV