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Interns and Residence Buildings

Appeal Brief Appeal Letter

Appeal Brief

DisasterFEMA-1008-DR
ApplicantLos Angeles County University of Southern California Medical Center
Appeal TypeSecond
PA ID#037-91033-00
PW ID#08974
Date Signed2009-08-13T04:00:00
Citation: FEMA-1008-DR-CA, Los Angeles County University of Southern CA Medical Center, Interns and Residents Building, Damage Survey Report 08974

Cross-reference: Grant Acceleration Program

Summary: Following the Northridge earthquake on January 17, 1994, Los Angeles County University of Southern CA Medical Center (Applicant) accepted a Public Assistance Grant Acceleration Program (GAP) offer in the amount of $793,631 to repair the Interns and Residents Building. Final eligible costs were funded on Large Project Closeout DSR 08974 in the amount of $952,581. On June 27, 2007, the Applicant appealed FEMA’s closeout decision to treat $10,320 in costs for Architecture and Engineering (A&E) construction administration services as project management costs. The Applicant argued that FEMA mischaracterized the expenses as project management soft costs when instead the costs were directly related to construction design and engineering services (hard costs). Re-characterization of the costs would result in a $11,971 GAP cost overrun ($10,320 in hard costs plus $1,651, the 16 percent allowance for project management soft costs) that could be offset by under-runs from another GAP project. To support its appeal, the Applicant submitted excerpts from the Instructional Guide for Cost Estimating Format (CEF), excerpts from the A&E Services Agreement, a bid advertisement invoice, a copy of the Project Completion and Certification Report, and copies of the Project Closeout Reports. FEMA denied the first appeal on February 8, 2008, because, consistent with the GAP guidelines and the documentation submitted, the costs associated with construction administration services is a project management (soft) cost and not a hard cost. On April 4, 2008, the Applicant filed its second appeal. The Applicant maintained that the $10,320 in costs should not be categorized as project management soft costs, but treated as hard costs associated with the actual design and engineering of the project. Support documents included a breakdown of A&E service fees and excerpts from the A&E Services Agreement with the Applicant.

Issues: Is the $10,320 in construction administration services a hard cost and, therefore is the $11,971 eligible for offset with GAP under-run funds?
Findings: No.

Rationale: 44 Code of Federal Regulations §206.206(a); Instructional Guide for Cost Estimating Format (CEF)

Appeal Letter

August 13, 2009

Frank McCarton
Governor’s Authorized Representative
California Emergency Management Agency
Response and Recovery Division
3650 Schriever Avenue
Mather, California 95655

Re: Second Appeal–Los Angeles County University of Southern CA Medical Center, PA ID 037-91033-00, Interns and Residents Building, FEMA-1008-DR-CA, Damage Survey Report (DSR) 08974

Dear Mr. McCarton:

This letter is in response to your letter (undated), which transmitted the referenced second appeal on behalf of Los Angeles County University of Southern CA Medical Center (Applicant). The Applicant is requesting that the Department of Homeland Security’s Federal Emergency Management Agency (FEMA) reconsider its treatment of costs for construction administration for the Interns and Residents Building as project management soft costs.Following the Northridge earthquake on January 17, 1994, the Applicant accepted a GAP offer in the amount of $793,631 to repair the Interns and Residents Building. Final eligible costs were funded on Large Project Closeout DSR 08974 in the amount of $952,581.On June 27, 2007, the Applicant appealed FEMA’s closeout decision to deny its request to treat $10,320 in costs as hard costs for Architecture and Engineering (A&E) construction administration services. The Applicant argued that FEMA mischaracterized the $10,320 as project management soft costs when the costs were directly related to construction design and engineering services (hard costs). The total amount in dispute was $11,971 ($10,320 in hard costs plus $1,651, the 16 percent allowance for project management soft costs attributable to the increase in hard costs) that could be offset by underruns from another eligible GAP project. The Deputy Regional Administrator denied the appeal on February 8, 2008, because pursuant to the Instructional Guide for Cost Estimating Format (CEF) and the documentation submitted, costs associated with construction administration and bid advertising were project management (soft) costs and not hard costs.The Applicant filed its second appeal on April 4, 2008. The Applicant maintained that the $10,320 in costs should not be categorized as project management (soft costs), but treated as eligible hard costs associated with the design and engineering of the project. The Applicant’s support documents included a copy of the Interns and Residents Building’s project closeout worksheet and additional excerpts from the A&E Services Agreement. The closeout worksheet lists categories of work with corresponding vendor names, job invoice numbers and service fees. However, the Applicant did not provide vendor invoices that identify the actual A&E (hard costs) services performed and the fees associated with those services to support its claim. The Applicant also cites guidance from the CEF Guide Part H.2, Architecture & Engineering Design Contact Costs, which states that certain expenses associated with A&E design contract costs may be classified as hard costs. The “certain” expenses include work on the actual design and engineering of a project, i.e., preparation of engineering calculations, architectural and/or engineering plans or drawings that are necessary to implement the eligible repairs. The Applicant failed to show that the A&E costs listed in its second appeal are the same A&E costs it cites from the CEF guide. We have reviewed all information submitted with the second appeal and have determined that questioned costs are appropriately characterized as project management soft costs pursuant to GAP guidelines and the documentation submitted. Therefore, 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, Appeals.

Sincerely,
/s/
James A. Walke
Acting Assistant Administrator
Disaster Assistance Directorate

cc: Nancy Ward
Regional Administrator
FEMA Region IX