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Central Cogeneration Plant

Appeal Brief Appeal Letter

Appeal Brief

DisasterFEMA-1008-DR
ApplicantLos Angeles County Internal Services Department
Appeal TypeSecond
PA ID#037-91036
PW ID#DSR 08975
Date Signed2009-01-05T05:00:00
Citation: FEMA-1008-DR-CA, Los Angeles County Internal Services Department,
Central Cogeneration Plant, DSR 08975

Cross-reference: Project Management Costs

Summary: The Northridge earthquake on January 17, 1994, damaged the Central Cogeneration Plant. Large Project Closeout DSR 08975 reduced eligible funding by $14,316 for failure to document eligible costs. In addition, FEMA treated $11,196 in Architectural and Engineering (A&E) construction administration costs as project management “soft” costs. On October 5, 2007, the Applicant submitted its first appeal requesting a permit fee, A&E construction administration costs, and the additional repair costs (de-obligated due to lack of documentation) for a total of $27,751 (which includes $2,239 in project management costs). The Applicant stated that A&E services are critical to the construction of the project and the A&E contractor is responsible for inspecting, analyzing, and verifying that the construction work is completed as specified and is not performing project management functions. It stated that it could not provide auditable documentation of some disaster-related repair costs as they were completed as part of ongoing facility maintenance; however, the Applicant maintained that these should be eligible costs. The Deputy Regional Administrator partially approved the appeal on May 8, 2008, concluding: $30 for a permit fee and associated project management was eligible; the A&E construction administration costs were properly treated as project management “soft” costs; and the Applicant failed to document eligible repair costs. The Applicant filed its second appeal on June 23, 2008. The Applicant reiterated its position from the first appeal stating that the characterization of A&E construction administration costs as project management “soft” costs is inappropriate and stated that funding related to repair work should be obligated.
Issues: 1. Are A&E construction administration costs eligible for reimbursement as
“soft” costs?
2. Did the Applicant provide documentation to support its claim for eligible repair costs?
Findings: 1. Yes.

2. No.

Rationale: Cost Estimating Format for Large Projects Instructional Guide (CEF Guide), Version 2 (November 1998); 44 CFR §13.20.

Appeal Letter

January 5, 2009

Frank McCarton
Governor’s Authorized Representative
Governor’s Office of Emergency Services
Response and Recovery Division
3650 Schriever Avenue
Mather, California 95655

Re: Second Appeal–Los Angeles County Internal Services Department, PA ID 037-91036, Central Cogeneration Plant, FEMA-1008-DR-CA, Damage Survey Report (DSR) 08975

Dear Mr. McCarton:

This letter is in response to your letter dated July 25, 2008, which transmitted the referenced second appeal on behalf of Los Angeles County Internal Services Department (Applicant). The Applicant is requesting that the Department of Homeland Security’s Federal Emergency Management Agency (FEMA) fund $27,751 for repairs and Architecture and Engineering (A&E) construction administration services for the Central Cogeneration Plant.The Northridge earthquake on January 17, 1994, damaged the Central Cogeneration Plant. Through DSR 53396 and the Grant Acceleration Program (GAP) DSR 98162, FEMA funded repairs of the facility. During closeout of the grant, FEMA reduced the eligible funding by $14,316 because the Applicant did not submit documentation to support these costs. In addition, FEMA treated $11,196 in A&E construction administration costs as project management “soft” costs rather than allowing the $11,196 plus $2,239 in project management costs as “hard” costs. FEMA reduced the eligible costs by $13,435 because the Applicant exceeded the maximum amount allowed for project management or “soft” costs.

On October 5, 2007, the Applicant submitted its first appeal requesting a permit fee, A&E construction administration costs, and the additional repair costs (de-obligated due to lack of documentation) for a total of $27,751 (which includes $2,239 in project management costs). The Applicant stated that A&E services are critical to the construction of the project and the A&E contractor is responsible for inspecting, analyzing, and verifying that the construction work is completed as specified and is not performing project management functions. It stated that it could not provide auditable documentation of some disaster-related repair costs as they were completed as part of ongoing facility maintenance. However, the Applicant maintained that these should be eligible costs.

The Deputy Regional Administrator partially approved the appeal on May 8, 2008, concluding that $30 for a permit fee and associated project management was eligible; the A&E construction administration costs were properly treated as project management “soft” costs; and the Applicant failed to document eligible repair costs.

The Applicant filed its second appeal on June 23, 2008. The Applicant reiterated its position from the first appeal stating that the characterization of A&E construction administration costs as project management “soft” costs is inappropriate and stated that funding related to repair work should be obligated. The Applicant states that the A&E contractor did not perform project management, but rather provided direction and consistency through the project and that these duties reflect those listed as eligible costs of basic construction inspection services under the Cost Estimating Format for Large Projects Instructional Guide (CEF Guide), Version 2 (November 1998). The Applicant also stated that it can prove repair work was completed, though it cannot provide documentation of related costs.The approved GAP funding for the Central Cogeneration Plant contained a limit on project management costs (“soft” costs). FEMA approved construction administration as a project management cost in the GAP settlement offer pursuant to the Northridge GAP Cost Estimating Format (CEF) Guide. In 2000, FEMA and the State agreed to caps on the Applicant’s claims for project management costs because FEMA determined that the Applicant’s initial claims for project management costs were excessive. FEMA did not place caps on construction costs (“hard” costs). For the Central Cogeneration Plant, the Applicant exceeded the approved project management costs and claimed construction administration costs as “hard” costs at closeout. However, the Applicant did not submit a description of specific tasks that it performed under construction administration that would justify their treatment as “hard” costs. In absence of documentation that the construction administration costs were “hard” costs, it is appropriate, and consistent with the GAP CEF Guide, to treat these costs as project management costs. It is also appropriate to address these costs during closeout in the same manner they were treated in the GAP settlement offer. Therefore, FEMA considers the $11,196 in construction administration costs to be excess project management costs. Therefore, these costs are not eligible.

Public Assistance regulations and policy require Applicants to provide sufficient documentation to support costs that Applicants incurred to complete eligible work. The Applicant stated that it cannot provide documentation to support costs it incurred because its regular employees performed the work. The Applicant further stated that its financial system does not allow it to easily track these costs. The Applicant stated that FEMA can verify that the work was completed by viewing photographs or visiting the site. The issue is not whether the Applicant completed the work. Rather, the issue is that the Applicant did not provide documentation to support costs it claimed for the work. Federal regulations and policy require all grant recipients to document the expenditure of all grant funds. The Applicant could not document that it
incurred the claimed costs. Therefore, there is no basis for reinstating the disallowed costs of $14,316.
Based on the above, 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.

Sincerely,
/s/
Carlos J. Castillo
Assistant Administrator
Disaster Assistance Directorate

cc: Karen Armes
Acting Regional Administrator
FEMA Region IX