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Second Appeal Letter
PA ID# 017-UK5VI-00; Timberland Acres Special Road District #1
PW ID# 150; Net Small Project Overrun
September 11, 2012
Louis B. Trammell
Arizona Division of Emergency Management
Department of Emergency and Military Affairs
5636 E McDowell Road, Building M5507
Phoenix, Arizona 85008
Re: Second Appeal–Timberland Acres Special Road District #1, PA ID 017-UK5VI-00, Net Small Project Overrun, FEMA-1888-DR-AZ, Project Worksheet (PW) 150
Dear Mr. Trammell:
This letter is in response to a letter from your office dated February 21, 2012, which transmitted the referenced second appeal on behalf of Timberland Acres Special District #1 (Applicant). The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) first appeal decision not to approve the entire project overrun cost of $180,995. The Applicant is requesting $45,392 that was not approved in the first appeal.
During the period from January 18 through January 22, 2010, severe winter storms damaged 35 roads in the Timberland Acres subdivision, which is located in Navajo County (County), Arizona. Roads located within Timberland Acres are maintained by the Applicant. The Applicant and the County have an Intergovernmental Agreement (IGA), dated June 22, 2010, where the County may act in the capacity of an independent contractor to make emergency repairs to the Applicant’s roads. However, the Applicant did not solicit bids from other contractors prior to entering into the IGA.
FEMA prepared two small project PWs to address Timberland Acres disaster-related road damage. PW 34 was prepared in the amount of $4,685 to cover the estimated cost for emergency road and ditch repairs. PW 150 was prepared to cover the estimated cost for permanent repairs to 9.77 miles of 20 foot-wide damaged gravel roads in the amount of $52,162, which includes the cost of one-inch thick gravel.
On March 31, 2011, following the completion of both small projects, the Applicant submitted a Net Small Project Overrun (NSPO) adjustment in the amount of $130,000 under PW 150 to the Arizona Department of Emergency Management (State). The Applicant claimed total project costs of $180,995, which included $86,507 in materials. The Applicant explained that the overrun was due to an inadequate estimate and a steeper grade which required an average of two inches of gravel rather than the one inch of gravel originally approved in the Scope of Work (SOW). Support documents included a copy of the County’s project repair estimate and a copy of a signed Intergovernmental Agreement between the Applicant and the County dated June 22, 2010.
The State reviewed the final cost documentation and agreed with the Applicant that the original estimate was insufficient to adequately address the SOW. Using actual costs and the original estimate of 1-inch gravel, the State recommended an NSPO in the amount of $144,155. On
June 27, 2011, the State asked FEMA to review the project documentation to determine reasonable costs for the road repairs.
FEMA agreed with the State’s recommendation that initial project costs were underestimated and indicated that it would review the project for reasonable costs because the work was not competitively bid. FEMA compared the County’s repair costs (Timberland Acres) with the costs of a similar County project (Timberlake Pines) and determined that the costs per mile were proportionally very similar when considering the thickness of the gravel used for road repairs. In addition, FEMA prepared a cost per cubic yard analysis using Applicant-provided data and by calculating that all damaged roads were 20-feet wide. FEMA determined that the quantity of gravel used for Timberland Acres road repairs almost doubled the gravel used for Timberlake Pines road repair and was more than 10-times the amount of gravel used for all other road repair sites. FEMA concluded that only the cost for one inch of gravel was eligible, $41,115. This was determined by dividing the cost of gravel ($86,507) by the number of inches of gravel actually applied (2.104 inches).
On December 2, 2011, based on FEMA’s analysis of actual project costs, the Regional Administrator partially approved the NSPO. The Regional Administrator determined that project costs had been underestimated and that the cost for the completed project was reasonable. The NSPO for PW 150 was approved for $83,442 bringing the total funding for the project to $135,603.
The Applicant submitted its second appeal on January 26, 2012, disputing the amount that was not approved in the first appeal, $45,392. The Applicant argues that more than half of the roads in its jurisdiction have grades steeper than 6 percent compared to County roads that have grades less than 4 percent. The Applicant states that an average gravel thickness of one-inch was originally used to estimate gravel quantities for the entire road length. However, two-inch gravel thickness to repair certain sections of damaged roads was required where only blading and reshaping was required on sections of County damaged roads. The Applicant also states that roads with steeper grades required more gravel due to the run-off of melting snow. The Applicant did not provide new documentation to support the second appeal.
On February 21, 2012, the State forwarded the Applicant’s second appeal to FEMA. The State supports FEMA’s original NSPO decision and does not recommend an increase in the approved project amount. The State explains that the cost to perform the Applicant’s repair work far exceeded the per-mile cost to repair County-owned roads at a cost increase that cannot be justified or supported by increased grades alone. The State further explains that when damage was initially assessed by the Applicant and State staff, the roads did not require a 2-inch depth in all areas, as there was a substantial amount of road material left in some areas. The average depth of 1 inch of gravel was agreed upon by all involved parties. The State also mentions that a final inspection of the work by the State showed that the roads were completely redone, regardless of whether or not there was damage in the area.
Title 44 Code of Federal Regulations (44 CFR) §206.205 (a), Payment of claims, Small projects, states that the State must certify that the applicant completed work in compliance with applicable laws, regulations, and policies. The State indicates that when the damage was initially assessed, there was a substantial amount of road material left in some areas and that an average depth of 1-inch gravel was agreed upon by all involved parties. However, a final inspection of completed work showed that additional and unapproved work had been performed by the Applicant, regardless of whether or not there was damage in the area.
When an applicant does not competitively procure contracts in accordance with 44 CFR §13.36, Procurement, FEMA may limit reimbursement of costs to amounts it determines to be reasonable for the eligible work pursuant to 44 CFR §13.43(a), Enforcement, Remedies for noncompliance. FEMA determines reasonable costs by analyzing the applicant’s procurement process, historical documentation, or competitive rates paid by applicants for similar work. FEMA prepared a cost per cubic yard analysis using Applicant-provided data and compared the Applicant’s revised cost estimate with the costs of similar projects. FEMA determined that the original project costs were underestimated, that the costs for the completed project were reasonable, and that only the cost for one inch of gravel is eligible, not two-inches of gravel.
In accordance with 44 CFR §206.204(e)(2) Project Performance, Cost Overruns and the Public Assistance Policy Digest dated January 2008, the appeal (NSPO) must include documentation of actual costs correlated to each line item in the approved scope of work. The Applicant has not submitted documentation to support the use of two inches of gravel rather than the one inch of gravel in the approved scope of work.
The Applicant did not provide new information with its second appeal to support its request for additional NSPO funding in the amount of $45,392. I have reviewed all information submitted with the second appeal and have determined that the Regional Administrator’s decision in the first appeal is consistent with PA Program statute and regulations. 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.
cc: Nancy Ward
FEMA Region IX