Generally, costs that can be directly tied to the performance of eligible work are eligible. Such costs must be:
Reasonable and necessary to accomplish the work;
Compliant with Federal, State, and local requirements for procurement; and
Reduced by all applicable credits, such as insurance proceeds and salvage values.
A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. In other words, a reasonable cost is a cost that is both fair and equitable for the type of work being performed. For example:
If the going rental rate for a backhoe is $25/hour, it would not be reasonable to charge $75/hour for a backhoe.
Determining reasonableness is particularly important when Federal funds are involved. Considerations should be given to whether the cost is of a type generally recognized as ordinary and necessary for the subject facility and type of work and whether the individuals concerned acted with prudence in conducting work. In addition, normal procedures must not be altered because of the potential for reimbursement from Federal funds.
Reasonable costs can be established through:
The use of historical documentation for similar work;
Average costs for similar work in the area;
Published unit costs from national cost estimating databases; and
FEMA cost codes.
In performing work, applicants must adhere to all Federal, State, and local procurement requirements. An applicant may not receive funding from two Federal sources to repair disaster damage this is considered a duplication of benefits. Such a duplication of benefits is prohibited by the Stafford Act. A State disaster assistance program is not considered a duplication of Federal funding. Insurance proceeds, donated grants from banks, private organizations, trust funds, and contingency funds must be evaluated individually to determine whether they constitute a duplication of benefits.
The eligible cost criteria referenced above apply to all direct costs, including labor, materials, equipment, and contracts awarded for the performance of eligible work.