Debris Removal Costs

Appeal Brief

Citation:   FEMA-4019-DR-NC, County of Hyde, Debris Removal Costs, Project Worksheet (PW) 1296

Cross-Reference:  Debris Removal, Reasonable Cost

Summary:  Strong winds from Hurricane Irene downed tree limbs and generated vegetative debris throughout Hyde County.  FEMA prepared PW 1296 for $1,833,070 to fund the County of Hyde’s (Applicant) debris removal activities countywide.  Upon review, FEMA determined that the Applicant’s procurement process for its original debris removal contract did not comply with the requirements of 44 Code of Federal Regulations (44 CFR) § 13.36, Procurement.  FEMA deemed $1,425,627 as reasonable and eligible for reimbursement based on the fee schedule submitted by the lowest bidder that responded to the Applicant’s request for proposals.  In the first appeal, the Applicant asserted that its actual costs incurred were eligible for reimbursement because they resulted from a competitive procurement process and an eligible pre-positioned contract for debris removal.  The Regional Administrator denied the appeal, stating that the Applicant’s procurement process did not meet the full requirements of a competitive procurement under 44 CFR Part 13.  Further, the Regional Administrator noted that the Applicant extended a contract related to a storm that occurred approximately one year prior to Hurricane Irene, rather than enter into a procurement process specific to the requirements of this event.  In the second appeal, the Applicant asserts that the factors FEMA used to deny its first appeal were inaccurate.  The Applicant maintains that it completed a full and competitive procurement process that satisfied 44 CFR Part 13 and was also consistent with FEMA’s guidance on pre-positioned contracts.  The Applicant provided documentation of its RFP and Board of Commissioners’ meeting minutes to demonstrate that the contract was a pre-positioned contract.  It also provided the four proposals that it received in response to the RFPs.  Additionally, the Applicant explained how its unique geographical setting, where part of the Applicant is on an island and would require contractors to use a ferry system and a possible toll route to remove debris, played a role in its decision to accept the highest bid, the only bid that it deemed to be responsive to the RFP. 

Issue:   Did the Applicant complete a procurement process that complies with the requirements of 44 CFR §13.36 and North Carolina General Statute §143-129?

Finding:  No.

Rationale:  44 CFR §13.36, Procurement; North Carolina General Statute §143-129, Procedure for letting of public contracts

Appeal Letter

Appeal Analysis

Background

In August 2011, strong winds from Hurricane Irene downed tree limbs and generated vegetative debris throughout Hyde County, North Carolina.  FEMA prepared Project Worksheet (PW) 1296 for $1,833,070 to fund Hyde County’s (Applicant) debris removal activities countywide.  The Applicant employed a contractor through a “pre-event contract” it entered into in 2010 for debris removal services.  During the review of the PW, FEMA determined that of the total cost claimed by the Applicant only $1,425,627 was eligible for reimbursement.  FEMA reduced the eligible amount by $407,442, based on the contract rates proposed by the lowest bidder that had responded to the Applicant’s request for proposals (RFP) for the pre-event contract.  The contractor the Applicant selected for the pre-event contract was the highest bidder.

First Appeal

The Applicant submitted its first appeal on July 11, 2012, requesting FEMA approve its actual costs for debris removal by increasing approved funding by $519,675.  (It is not clear why the Applicant requested this amount, because FEMA denied $407,442.) The Applicant explained its reasoning for awarding the contract to the highest bidder, stating that the contractor was the only bidder that had previous experience removing debris from an island, possessed the necessary equipment to do so, and demonstrated knowledge of the County and its unique geography (by including fees for debris transported by ferry from Ocracoke Island).  The Applicant cited North Carolina General Statute 143-129, which requires that contracts be awarded to the “lowest responsible bidder, taking into consideration quality, performance, and the time specified in the proposals for the performance of the contract.” 

On February 1, 2013, the FEMA Region IV Regional Administrator denied the Applicant’s first appeal, determining that “[t]he process followed by the subgrantee does not meet the full requirements of a competitive procurement per 44 CFR, Part 13.”  Further, FEMA maintained that the Applicant extended a contract related to a storm that occurred approximately one year prior to Hurricane Irene rather than enter into a procurement process specific to the hurricane’s requirements.  Additionally, FEMA contended that three of the four bids received in response to the Applicant’s RFP were unit price (cubic yard) proposals but that the highest bid, the one that the Applicant accepted, was a time and materials proposal.

Second Appeal

The Applicant submitted its second appeal on May 2, 2013, asserting that the factors FEMA used to deny its first appeal were inaccurate.  The Applicant maintains that it completed a full and competitive procurement process that satisfied Title 44 of the Code of Federal Regulations (44 CFR) Part 13 and was also consistent with FEMA’s guidance on pre-positioned contracts.  In support of its position, the Applicant provided its RFP and Board of Commissioners’ meeting minutes, as well as the four proposals that it received in response to the RFP, claiming that all four were unit price proposals.  Additionally, the Applicant explains how its unique geographical setting, where part of the county is on an island and would require contractors to use a ferry system and a possible toll route to remove debris, played a role in its decision to accept the highest bid, the only bid that it deemed to be responsive to the RFP.    

Discussion

Procurement

According to 44 CFR § 13.36, Procurement, allowable costs must be in compliance with federal, state, and local requirements for competitive procurement.  On the federal level, 44 CFR § 13.36(b)(8) specifies  that grantees and subgrantees “will make awards only to responsible contractors possessing the ability to perform successfully under the terms and conditions of the proposed procurement.”  On the state level, North Carolina requires, as is codified in North Carolina General Statute § 143-129, Procedure for letting of public contracts, that “all proposals shall be opened in public and the board or governing body shall award the contract to the lowest responsible bidder or bidders, taking into consideration quality, performance and the time specified in the proposals for the performance of the contract.” 

The Applicant issued the RFP for a “pre-event contract” for debris management and removal services in June 2010.  In the RFP, the Applicant listed the following areas of consideration and the attached weight it would give to each area in its evaluation:  Experience, 20%; Technical Capabilities, 20%, Equipment, 20%, Reasonableness of Price, 20%, and References, 20%.  The RFP also indicated that the contractor needed to thoroughly review county geography prior to submitting its proposal and stated:

The Emergency Management Department will be happy to meet with any prospective contractor on these issues prior to the deadline and encourages site visits.  There is one landfill within Hyde County.  The county also utilizes a regional landfill in Bertie County, NC. 

Vehicle access to Ocracoke Island and debris removal will require the use of the N.C. Ferry System.  The most desirable route is a toll route, while another longer route is a free ferry.  Please review this information carefully.

The Applicant received four bids in response to the RFP and awarded the corresponding Pre-Event Agreement for Debris Management and Removal Services on September 2, 2010, to J.B. Coxwell, a contracting firm that was the highest bidder.  The contractor’s response to the RFP was the only response out of the four that included unit prices for ferry rides in its proposal.  The Applicant maintains that by including the unit prices for the ferry rides, J.B. Coxwell was the only responsible bidder.  The Applicant states that J.B. Coxwell was the only bidder that had previous experience removing debris from Ocracoke Island and that considered costs related to the County’s unique geographical setting and the North Carolina Ferry System by including fees for debris transported by ferry from the island.

While the Applicant provides statements in support of its decision to award the contract to the highest bidder, the Applicant did not provide documentation supporting that it evaluated all four RFPs based on the areas of consideration listed in its RFP.  The Applicant refers to “proposer rankings” in its appeal but has provided no documentation supporting that it ranked all bids.  The Applicant asserts that the contractors that were not selected were not “responsive” because they failed to address the special considerations outlined in the RFP.  However, there is no indication that the three other contractors did not take those special considerations into account when developing the bid unit prices.  Simply because J.B. Coxwell included unit prices for the ferry rides and the others did not does not justify disqualifying the other three bids.  Based on the documentation, the Applicant did not follow the state procurement procedures detailed above. Therefore, the actual costs associated with the debris removal activities performed by J.B. Coxwell are not eligible for funding.

If FEMA determines costs associated with contracted work to be ineligible, FEMA may evaluate and reimburse costs it finds fair and reasonable for eligible work performed.  In this case, the FEMA Regional Administrator determined that a fair and reasonable cost for the debris removal activities performed by J.B. Coxwell is that based on the low bidder’s unit prices.  This is a valid approach to determine reasonable costs.

Pre-Positioned Contract

Recovery Fact Sheet RP9580.201, Debris Contracting Guidance and the FEMA Debris Management Guide (FEMA 325, July 2007) describe methods by which applicants can expedite the procurement process without jeopardizing potential funding.  Pre-event contracts, under which the applicant may choose to solicit bids and award contracts before a disaster strikes, are listed as an allowable method for expediting the procurement process.  According to the FEMA Debris Management Guide, a pre-positioned contract “allows time for a deliberate procurement process and gives applicants flexibility in mobilizing the appropriate resources in anticipation of an event.” 

Based on a review of the documentation submitted with the second appeal, the contract is a pre-positioned contract as described in FEMA’s guidance. Though the contractor and County signed the contract during Hurricane Earl, the County chose to solicit and review proposals months before the hurricane struck.  Further, all of the documentation created prior to Hurricane Earl referred to the contract for which the County was soliciting bids as “pre-event.”    Further, the terms outlined in the contract indicate that it was valid through November 30, 2011, and would extend for two additional one-year periods unless either the Applicant or the contractor notified the other in writing not less than ninety days prior to November 30, 2011.  Regardless, as discussed above, the actual costs for the work performed by J.B. Coxwell are not eligible for funding. 

Conclusion

The Applicant did not follow the procurement standards; therefore, the actual contract costs for the debris removal activities in PW 1296 are not eligible.  Reasonable costs based on the low bidder’s unit prices are eligible.