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Second Appeal Letter
PA ID# 086-99086-00; Miami-Dade County
PW ID# 8889; Miami International Airport-South Terminal
September 13, 2012
Florida Emergency Management Agency
2555 Shumard Oak Boulevard
Tallahassee, Florida 32399-2100
Re: Second Appeal - Miami-Dade County, PA ID 086-99086-00, Miami International Airport-South Terminal, FEMA-1609-DR-FL, Project Worksheet (PW) 8889
Dear Mr. Koon:
This letter is in response to a letter from your office dated November 29, 2011, which transmitted the referenced second appeal on behalf of Miami-Dade County (Applicant). The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $4,199,192 in funding for costs associated with repair of hurricane damage to the South Terminal of the Miami International Airport.
On October 24, 2005, strong winds, torrential rain, and storm surge from Hurricane Wilma damaged the Miami International Airport’s (MIA) South Terminal. At the time of the disaster, the terminal was under construction as part of an airport terminal expansion project. FEMA prepared PW 8885 in the amount of $1,032,750 and PW 8889 in the amount of $4,199,192 for the costs of emergency protective measures and permanent repair, respectively. Upon review, FEMA determined that the PWs were not eligible for reimbursement because the work was not the legal responsibility of the Applicant. Pursuant to Title 44 of the Code of Federal Regulations (44 CFR) §206.223, General work eligibility, “to be eligible for financial assistance, an item of work must … be the legal responsibility of an eligible applicant.”
In reviewing the Applicant’s contract for the MIA South Terminal Program, FEMA determined that the construction manager/contractor, Parsons-Oderbrecht, J.V., was legally responsible for disaster related work on the damaged facility. This determination was based on a section of the contract titled, “Contractor’s Responsibility for the Work,” which states that the work “shall be under the charge and care of the Contractor, and he shall take every necessary precaution to protect against loss or damage to any part of the work by the action of the elements or from any other cause whatsoever, whether arising from execution or from the non-execution of the work. The Contractor shall rebuild, repair, restore, and make good at his own expense all loss or damage to any portion of the work occasioned by any of the foregoing causes before its completion and acceptance.” As the Applicant had not accepted any part of the South Terminal Project as substantially complete, or taken beneficial occupancy of any part of the project, the work remained the responsibility of the contractor. Consequently, FEMA processed each of the PWs as ineligible for $0.
The Applicant submitted an appeal to the Florida Division of Emergency Management (Grantee) on November 2, 2006. In the appeal letter, the Applicant claimed that Miami-Dade County had the legal responsibility for the costs identified in the PWs. In support of its claim, the Applicant submitted five attachments with the appeal. The attachments include the Construction Contingency Allowance, Builder’s Risk Policy, Annex #10 to contract H010A and two letters from Zurich Insurance Company. The appeal letter noted that due to the voluminous and sensitive nature of the documentation supporting the Applicant’s claims, additional documentation was available for review and inspection at the Applicant’s Office of the County Attorney.
On March 28, 2008, the FEMA Regional Administrator (RA) partially approved the first appeal. The RA determined that item “B” of section 11.2.1 of the contract, specifically identified “costs associated with protecting the existing work and the project site in response to a tropical storm or hurricane warning” as reimbursable by the Applicant through the construction contingency allowance. FEMA prepared and obligated a version of PW 8885 for $998,772 for the eligible emergency protective measures. However, the RA determined that there were no provisions in the contract that relieved the contractor of its legal responsibility for repairing the storm damage. The RA explained that item “P” of section 11.2.1, which addressed repair of damage not due to negligence pertained to other types of damage and not specifically damage due to weather.
The Applicant submitted a second appeal to the Grantee on June 29, 2011. In the appeal, the Applicant maintains that it was contractually obligated, and thereby had the legal responsibility, to pay the cost of repairing the hurricane damage to the terminal. The Applicant explains that because it would have been cost prohibitive for the contractor to absorb all of the risks associated with damage to the $510M facility, two provisions of the contract alleviate that burden by identifying the Applicant as responsible for the Builder’s Risk premiums under Section 11.2.1(i) and all insurance deductible costs associated with the project under Annex 10. According to the Applicant, this agreement to remunerate the insurance premiums and deductibles establishes the Applicant’s responsibility for the repair costs in accordance with Public Assistance Guide (FEMA322, October 1999), which states, “Repairs are eligible if the contract under which the work is being performed places responsibility for damage on the applicant during the construction period.”
FEMA’s regulations at 44 CFR §206.223(a), General work eligibility, General, describe the basic criteria that must be met in order to eligible for Public Assistance funding, including the requirement that the work in question must be the legal responsibility of an eligible applicant. When a facility is under construction, legal responsibility for repairs generally remains with the contractor until the owner accepts the work as complete. However, Section 406(e)(4) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act does make eligible the costs of repairs to facilities under construction at the time of a disaster to the extent the construction contract makes those costs the owner’s responsibility and not the contractor’s.
The Applicant’s contract with the contractor contains provisions clearly stating that the contractor retains “charge and care” of the terminal construction project until substantial completion or beneficial occupancy by the Applicant. The contractor was required to protect against loss or damage caused by “the elements or from any other cause whatsoever,” and if such loss damage occurred, it was obligated to make repairs at its “own expense.” According to Sections 4.3 and 11.3 of the Applicant’s contract with the contractor, “The Contractor shall rebuild, repair, restore and make good all injuries or damage to any portion of the work occasioned by any of the above causes before Final Acceptance and shall bear the expense thereof.”
Although Annex 10 of the Applicant’s construction contract requires the Applicant to be responsible for the deductible amount under Builder’s Risk Insurance obtained for the project, the contract itself does not make the Applicant responsible for repair costs during construction. As noted, the contract expressly makes the contractor responsible for such costs. Therefore, the “Special Rule” under Section 406(e)(4) of the Stafford Act, making eligible any repair costs that are the owner’s responsibility under a construction contract, does not appear to apply. Therefore, the Applicant is not eligible for Public Assistance funding to reimburse the costs documented on PW 8889 under the major disaster declaration FEMA-1609-DR-FL.
I have reviewed the information submitted with the appeal and have determined that the Regional Administrator’s decision in the first appeal is consistent with Public Assistance regulations and policy. Accordingly, I am 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