The Panel was established by Congress in the Disaster Mitigation Act of 2000 (DMA 2000) under Public Law 106-390. Section 205e(3) of DMA 2000 directs FEMA to establish a methodology, consistent with industry practices, for estimating the cost of large projects to include, the establishment of reasonable floor and ceiling thresholds expressed as a percentage of the total eligible project cost. FEMA will base the methodology on recommendations made by technical experts (the Panel) representing the construction industry and state and local governments. The Panel was founded as an Advisory Committee pursuant to the Federal Advisory Committee Act, 5 U.S.C. Appendix I, and the Presidential Reorganization Order Number 3 of 1978.
The Federal Advisory Committee charter for the Panel includes the following objectives, responsibilities, and scope of duties:
Evaluate the Public Assistance Program methodology for estimating the cost of repairing, restoring, reconstructing, or replacing a public facility or private non-profit facility on the basis of the design of the facility as the facility existed immediately before the disaster; and in conformity with codes, specifications, and standards (including floodplain management and hazard mitigation criteria required by the President or under the Coastal Barrier Resources Act (16 U.S.C. 3501 et. seq.)) applicable at the time the disaster occurred.
Review the Cost Estimating Format for Large Projects (CEF) materials and determine if the CEF is appropriate for the PA Program.
Determine the level of technical expertise required to uniformly apply the recommended cost estimating methodology and instrument to maximize accuracy and national applicability.
Submit a Recommendation Report to the Director of FEMA containing a description of the Panel's activities; an evaluation of FEMA's cost estimating procedures and any activities to revise and update these products; and the Panel's recommendations consisting of:
procedures for estimating the cost of repairing, restoring, reconstructing, or replacing a facility consistent with industry practices, and
establishing reasonable floor and ceiling percentages related to the estimated cost.
In fulfilling the technical and representation requirements of DMA 2000, the Federal Emergency Management Agency invited professional organizations to nominate candidates for membership on the Panel. Panel members were required to have expertise in design, construction and cost estimating of roads, water control facilities, buildings, utility systems, and recreational facilities, and represent various geographical regions of the country. The Federal Emergency Management Agency (also the Designated Federal Official) and the National Emergency Management Association co-chair the Panel. Panel members represent the following organizations:
The American Association of State and Highway Transportation Officials (AASHTO)
The Associated General Contr?actors of America, In?c. (AGCA)
The American Institute of Architects (AIA)
The American Public Works Association (APWA)
The American Society of Professional Estimators (ASPE)
The National Association of County Engineers (NACE)
The National Society of Professional Engineers (NSPE)
The Panel shall function on a continuing basis in accordance with the authorizing statute unless terminated by appropriate legislative authority. The Panel will meet two times in Federal fiscal year 2001, and if needed, will meet one time in Federal fiscal year 2002. Thereafter, the Panel will meet not later than one year after the date of promulgation of regulations by FEMA, three years after that date and at the end of each two-year period. The purpose of the meetings is to examine the appropriateness of the adopted cost estimating procedure and to periodically submit a report to Congress on the Panel's findings.
Regarding the establishment of reasonable floor and ceiling percentages relating to the modification of eligible cost provision of the law, Section 205e(2) of DMA 2000 provides that if:
(A) ACTUAL COST GREATER THAN CEILING PERCENTAGE OF ESTIMATED COST.--
In any case in which the actual cost of repairing, restoring, reconstructing, or replacing a facility under this section is greater than the ceiling percentage established under paragraph (3) of the cost estimated under paragraph (1), the President may determine that the eligible cost includes a portion of the actual cost of the repair, restoration, reconstruction, or replacement that exceeds the cost estimated under paragraph (1).
(B) ACTUAL COST LESS THAN ESTIMATED COST.--
(i) GREATER THAN OR EQUAL TO FLOOR PERCENT-AGE OF ESTIMATED COST.- In any case in which the actual cost of repairing, restoring, reconstructing, or replacing a facility under this section is less than 100 percent of the cost estimated under paragraph (1), but is greater than or equal to the floor percentage established under paragraph (3) of the cost estimated under paragraph (1), the State or local government or person receiving funds under this section shall use the excess funds to carry out cost-effective activities that reduce the risk of future damage, hardship, or suffering from a major disaster.
(ii) LESS THAN FLOOR PERCENTAGE OF ESTIMATED COST.- In any case in which the actual cost of repairing, restoring, reconstructing, or replacing a facility under this section is less than the floor percentage established under paragraph (3) of the cost estimated under paragraph (1), the State or local government or person receiving assistance under this section shall reimburse the President in the amount of the difference."
If the actual cost of a project is less than the estimated cost, the applicant may use a portion of the underrun on cost effective mitigation activities. If actual costs are less than the estimated costs by more than a certain percentage, the amount of the underrun that is over the percentage must be reimbursed to FEMA. If actual costs exceed estimated costs and are less than a certain percentage, the applicant absorbs the cost. If actual costs exceed the estimated costs by more than a certain percentage, the amount over the percentage may be eligible, provided the applicant identified additional eligible damage during construction and FEMA approved the revised scope of work.
During the first meeting of the Expert Panel on Cost Estimating (see Final Meeting Minutes below), the Panel chose -10% and +10%, respectively, for the floor and ceiling thresholds. The selected thresholds best represent engineering and construction industry standards for estimating project costs. The thresholds will be incorporated within the cost estimating procedure recommended by the Panel to the Director. States will continue to disburse funds to applicants as they complete the work.
The law codifies practices FEMA employed during the Northridge Earthquake and afterward with the Cost Estimating Format for Large Projects (for the Public Assistance Program). The law will allow FEMA and the applicants to better estimate the actual cost to repair, restore, or replace damaged facilities and programmatically close applicants and disasters sooner than is the case now.
This provision does not affect Section 422, Simplified procedure, and Section 423, Appeal of assistance decisions, of the Stafford Act.