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Second Appeal Analysis
PA ID# 000-U0FD2-00; California Department of Water Resources
PW ID# 824 and 858; San Joaquin Flood-Fighting Activities
In the spring of 2006, a severe storm caused flooding, mudslides, and landslides in central California. On June 5, 2006, the President issued a major disaster declaration (FEMA-1646-DR-CA) with an incident period of March 29, 2006 to April 16, 2006. The California Department of Water Resources (Applicant) carried out emergency flood-fighting activities at dozens of sites along the San Joaquin River to prevent levee failure from seepage, erosion, and river water overtopping. The Applicant performed the work along flood-control facilities within three counties included in the major disaster declaration (Stanislaus, San Joaquin, and Madera counties), as well as along flood-control facilities in the City of Firebaugh and other parts of Fresno County, a county that was not included in the declaration.
The Applicant utilized contract and force account labor, materials, and equipment to carry out this work. For the contracted work, the Applicant, employing an emergency procurement process, negotiated time-and-materials contracts with two contractors already performing work under other contracts with the Applicant. FEMA prepared Project Worksheets (PWs) 838 and 824 to reimburse the Applicant’s claimed contract costs for emergency protective measures. FEMA prepared PW 838 to fund costs claimed on time-and-material invoices for one contractor in the amount of $1,035,620. Later in 2006, FEMA processed PW 838 for $0, and the Applicant did not appeal that action. FEMA prepared PW 824 to fund costs claimed on time-and-material invoices for the other contractor in the amount of $2,656,725. That contractor had performed flood-fighting work in Madera County and Fresno County.
For the force account work, FEMA prepared PW 858 to reimburse the Applicant’s $935,244 in claimed costs for force account labor, materials, and equipment for emergency protective measures. These costs were associated with flood-fighting work the Applicant performed in Madera, San Joaquin, and Stanislaus counties, as well as for the establishment of an emergency command center at the Stockton Fair Grounds.
FEMA did not obligate PWs 824 and 858 due to issues regarding contracting, documentation, environmental compliance, and eligible costs.
In a June 11, 2007 letter to the Applicant, the U.S. Department of Commerce’s National Marine Fisheries Service (NMFS) informed the Applicant of its concern that emergency levee repair work conducted along Paradise Cut in the San Joaquin River Basin could, without specific conservation measures, adversely impact riparian habitats. The NMFS provided the Applicant with specific conservation measures it could employ to help compensate for the loss of beneficial habitat features caused by the emergency work. In a June 18, 2007 letter to the Applicant, the U.S. Department of the Interior’s Fish and Wildlife Service (FWS) expressed similar concerns related to the repair work’s effect on certain endangered animal species. FWS requested that the applicant submit a complete biological assessment (BA) to either FEMA or the U.S. Army Corps of Engineers (USACE) to enable a formal federal agency consultation to take place pursuant to Section 7 of the Endangered Species Act (known as a “Section 7” consultation).
On October 4, 2007, representatives of the California Governor’s Office of Emergency Services (Grantee), the Applicant, FEMA, and a FEMA environmental contractor met to discuss funding eligibility. FEMA explained that a lack of project information precluded it from drafting the BA, and the Applicant subsequently agreed to gather the necessary information and draft the BA using contractor support. The parties also agreed that the Applicant would provide key pieces of information and documentation, including the exact location of each work site, a detailed description of work completed at each site, and an accounting of actual incurred costs for work completed at each site. In a December 20, 2007 letter to the Grantee, FEMA again requested this information and documentation and informed the Grantee that a response was required within 60 days.
The Applicant provided a response in a memorandum dated February 20, 2008, which the Grantee forwarded to FEMA in a letter dated March 24, 2008. In its response, the Applicant provided internal memoranda regarding contract procurement and environmental compliance, as well as a compact disc containing maps, photos, and some information about work that took place primarily along the Chowchilla Bypass.
FEMA issued a formal eligibility determination in a letter dated October 9, 2008. FEMA explained that PWs 824 and 858 could not be obligated because the Applicant had not provided sufficient information and documentation. In general, FEMA noted that information about the work completed at each site and the costs incurred at each site remained lacking. FEMA also explained that some of Applicant’s supporting documentation pertained to sites in and around the City of Firebaugh, which is located in Fresno County and outside of the designated disaster area, and that the work descriptions indicated some items of work did not constitute eligible emergency protective measures. As to PW 858, specifically, FEMA pointed out that the Applicant’s time-and-materials contract violated applicable federal regulations and that, although FEMA may reimburse fair and reasonable eligible costs in such situations, the Applicant failed to provide specific enough information to distinguish eligible and ineligible work and costs. FEMA also noted that the Section 7 consultation and Endangered Species Act compliance procedures required for obligation of both PWs could not move forward without the requisite information.
The Applicant submitted a first appeal in a letter dated December 5, 2008, which the Grantee forwarded to FEMA in a letter dated December 30, 2008. The Applicant included a listing of work site locations and costs, as well as records related to force account labor and equipment costs. The Applicant asserted that this documentation would provide all of the information FEMA required.
During the appeal review, FEMA issued a letter to the Grantee dated October 5, 2010, reiterating that FEMA needed documentation and a draft BA from the Applicant in order to comply with Endangered Species Act requirements and that the Applicant’s failure to comply with that law would jeopardize its request for reimbursement. In a letter dated December 20, 2010, the Grantee forwarded a BA that the Grantee had received from the Applicant on December 6, 2010. The BA was dated April 2008. In a letter to the Grantee dated October 17, 2011, FEMA explained that the BA the Applicant provided failed to include the information necessary to initiate a formal Section 7 consultation. FEMA noted that, instead, the BA largely evaluated impacts to species resulting from permanent repairs to sites that would be funded by the USACE, not FEMA. FEMA again requested, within 60 days, a BA addressing the sites at issue in PWs 824 and 858. Due to a clerical oversight, the Grantee did not forward this letter to the Applicant until February 28, 2012. The Applicant responded in a letter dated March 20, 2012, pointing to email messages and correspondence that, it argued, demonstrated compliance with FWS and NMFS requirements and concerns.
The Region IX Deputy Regional Administrator denied the first appeal in a letter dated October 3, 2012. The letter included a bulleted summary of the numerous “deficiencies upon which the eligibility determination was predicated.” These included the fact that some work was performed in Fresno County, which was not included in the disaster declaration; that some work did not constitute emergency protective measures; that contracted work was performed under an improperly procured and structured contract; that some work was performed on projects under the authority of USACE; that the BA the Applicant provided addressed non-FEMA projects and projects not included in PWs 824 and 858 (except for one); and that the documentation the Applicant had provided did not identify specific work and associated costs with each site. With respect to documentation, the Deputy Regional Administrator’s letter noted that the Applicant had provided no new information with its first appeal.
The Applicant submitted a second appeal in a letter dated December 18, 2012, which the Grantee transmitted to FEMA in a letter dated February 15, 2013. The Applicant’s second appeal briefly addresses each of the eligibility deficiencies highlighted in the first appeal decision in bulleted form. The Applicant included documentation in the form of email correspondence addressing the Applicant’s claimed costs, procurement materials, and a listing of work sites.
Under the Public Assistance program, for any item of work to be eligible for financial assistance, it must (1) be required as a result of the emergency or major disaster event, (2) located within the designated area of the major disaster or emergency declaration, and (3) be the legal responsibility of an eligible applicant. For emergency protective measures to be eligible, they must either (1) eliminate or lessen immediate threats to life, public health or safety, or (2) eliminate or lessen immediate threats of significant additional damage to improved public or private property through cost-effective measures.
Of all the deficiencies related to the Applicant’s request for reimbursement under PWs 824 and 858, most significant is the lack of adequate supporting documentation demonstrating that the claimed costs relate to work that was required by FEMA-1646-DR-CA, located within designated areas, the responsibility of the Applicant, and necessary to address immediate threats to life, public health, safety, or property. The lack of adequate documentation has made it impossible for FEMA to distinguish between eligible and ineligible costs. Well after the event and the drafting of the PWs, the Applicant agreed, in October 2007, to provide key pieces of missing information, including work site locations, detailed descriptions of the work completed at each site, and an accounting of incurred costs for the work completed. Following a subsequent written request from FEMA, the Applicant provided, in early 2008, some documentation. This documentation provided little new information. A site list the Applicant provided did highlight work site locations based on latitude and longitude coordinates and levee mile markers, but the sites were mainly limited to the Chowchilla Bypass—only one of numerous sites addressed in the PWs. Moreover, a “work performed” column contained vague work descriptions—such as “rip rap on landslide” and “geotextile & drain work”—that prevented FEMA from making a determination as to whether the work was required as the result of the disaster. The Applicant’s documentation also failed to provide other vital information, such as quantities, dimensions, costs incurred, and related invoices. In its first appeal, the Applicant provided similarly vague information. Exhibit A to its first appeal, provided in support of its claim under PW 824 for contract costs, listed additional work sites and coordinates, but again failed to provide adequate descriptions of work performed. Documentation supporting the Applicant’s claim under PW 858 similarly failed to provide sufficient detail to distinguish eligible and ineligible work.
In its second appeal, in response to FEMA’s conclusion that the documentation submitted failed to identify specific work and associated costs at each site, the Applicant simply re-submitted, as Exhibit 4, the spreadsheet constituting Exhibit A to its first appeal. This exhibit again provides coordinates for site locations and claimed contract costs but does not adequately describe the work performed to allow for a determination of eligibility. The exhibit simply includes a “Comment” column with descriptions such as “Start of drain 2” and “End of drain 2.” As to its force account costs, Applicant offered no additional documentation and rests on the labor and equipment documentation it provided in its first appeal. That documentation is also insufficient. Exhibit B, for example, lists hours worked by employees without describing the work performed or detailing the location of the work performed.
The lack of detail prevents FEMA from ensuring the eligibility of the work. For instance, some work was performed in Fresno County, which was not a declared county under FEMA-1646-DR-CA. The Applicant asserts that e-mail exchanges with a FEMA contractor that reviewed the Applicant’s first appeal shows that FEMA agreed to account for work performed in ineligible areas by reducing PW costs by a certain percentage. In fact, the idea of a percentage reduction merely was a proposal by an Applicant representative, which the FEMA contractor stated would be referenced when addressing changes to the Applicant’s claimed costs. FEMA never applied a percentage reduction, and PW 824 and 858 remained fully unobligated.
Documents provided by the Applicant also show that some work was performed on projects under the authority of the USACE and, therefore, not the Applicant’s responsibility. For example, a November 27, 2006, memorandum to the Applicant’s engineering division chief states that six USACE sites would be incorporated into the time-and-materials contract entered into by the Applicant. In addition, the BA provided by the applicant largely addressed permanent repairs to USACE funded projects, not emergency work projects under the responsibility of the Applicant. Without sufficient work and cost documentation, FEMA cannot differentiate between work performed that was the Applicant’s responsibility from work that was not. The Applicant similarly asserts that, in the e-mail correspondence with the FEMA contractor, this issue was resolved. Again, however, the contractor merely took the Applicant’s proposal under advisement.
Specifically as to PW 824, the Applicant entered into a time-and-materials, sole-source contract with a contractor by “piggybacking” onto a pre-existing contract. Generally, time-and-materials contracts and “piggyback” contracts are discouraged by FEMA. Under FEMA policy, time-and-materials contracts, if used, must include a ceiling price and should be limited for work that is necessary immediately after a disaster, not to exceed 70 hours. Here, the contract did contain a ceiling price, but that ceiling was exceeded. In addition, work under the contract extended well beyond 70 hours. Even when an applicant fails to adhere to applicable contracting rules and policy, FEMA may reimburse the reasonable costs of eligible work performed. However, without sufficient documentation to enable FEMA to determine what work is eligible, FEMA is not in a position to determine an amount for reimbursement that could be considered reasonable.
The Applicant has not provided sufficient documentation to enable FEMA to differentiate between eligible and ineligible work and determine the reasonableness of the costs for which the Applicant seeks reimbursement. Accordingly, the costs claimed by the Applicant for emergency protective measures documented in PWs 824 and 858.
 See 44 C.F.R. § 206.223(a).
 See 44 C.F.R. § 206.225(a)(3).
 See Recovery Fact Sheet 9580.212, Public Assistance Grant Contracting Frequently Asked Questions (FAQ), at 4 (FAQ #6).