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Debris Removal from Private Businesses

Appeal Brief Appeal Letter

Appeal Brief

DisasterFEMA-1709-DR
ApplicantCity of Marble Falls
Appeal TypeSecond
PA ID#053-46584-00
PW ID#3385
Date Signed2010-03-23T04:00:00
Citation:           FEMA-1709-DR-TX, City of Marble Falls PW 3385


Cross-
References:
     Debris Removal, Documentation, Private Property and Private Roads, Work Eligibility

Summary:         On June 27, 2007, flooding occurred in Marble Falls, Texas (Applicant).  FEMA prepared PW 3385 to cover the Applicant’s debris removal costs.  FEMA denied reimbursement of the Applicant’s expenses relating to the use of roll-off containers for the disposal of debris that was removed from private commercial property and for the payment of profit and overhead to the Applicant’s debris removal contractor.  The Regional Administrator denied the first appeal because the Applicant was not eligible to remove debris from private property and because the Applicant’s unit price debris removal contract was presumed to include profit and overhead.  The Applicant’s second appeal raises the same issues.  There is no information in the file that indicates that the direct costs included profit.  The Applicant calculated that the direct cost was $132,568.  The contractor calculated a 15-percent profit margin.  When applied to the cost of the eligible work ($70,073), the eligible profit is $10,511.

Issues:          1. Has the Applicant demonstrated that placement of roll-off containers on private commercial properties resulted in eligible debris removal costs?

                      2. Is the Applicant entitled to reimbursement of its contractor’s profit from eligible debris work?

Findings:       1. No.
                        2. Yes.

Rationale: Sections 403 and 407 of the Stafford Act; 44 CFR §§206.223(a), General Work Eligibility and 206.224(a), Debris Removal; FEMA-321, Public Assistance Policy Digest
 

Appeal Letter

March 23, 2010

 

 

 

Jack Colley

Chief, Division of Emergency Management

State of Texas

P.O. Box 4087

Austin, Texas 78773-0220

 

Re:  Second Appeal–City of Marble Falls, FEMA-1709-DR-TX, PA ID 053-465584-00,

       Debris Removal from Private Businesses, Project Worksheet (PW) 3385

 

Dear Mr. Colley:

 

This letter is in response to your letter dated July 16, 2008, which transmitted the referenced second appeal on behalf of the City of Marble Falls (Applicant).  The Applicant is appealing the Department of Homeland Security’s (DHS) Federal Emergency Management Agency’s (FEMA) denial of $82,483 to remove debris from private commercial property using roll-off containers.

Background

On June 27, 2007, heavy rain caused flooding throughout the city of Marble Falls, Texas.  FEMA prepared PW 3385 to cover the Applicant’s debris removal costs.  One aspect of the debris removal project involved collecting debris in roll-off containers.  FEMA denied $62,585 for the cost of containers that the Applicant placed on private commercial properties because debris removal from private commercial property is generally not eligible for reimbursement.  FEMA also denied $19,898 profit for the Applicant’s debris removal contractor.  FEMA determined that the Applicant did not submit sufficient information to demonstrate that the contractor’s unit prices did not include profit.

First Appeal

The Applicant filed its first appeal on January 31, 2008.  The Applicant contracted with its pre-disaster garbage collection contractor to remove debris caused by the major disaster.  The Applicant explained that it opted to place containers throughout heavily impacted parts of the city so volunteers and the public could dump debris into the containers.  The Applicant acknowledged that “some business generated debris was included within total volumes (but) no containers were placed for the sole benefit of the business venture(s)….”  The Applicant asserted that because the cost of the containers was reasonable and was a necessary part of the debris removal activities, it is eligible for FEMA reimbursement.  The Applicant also argued that $19,898 of the invoice it received from its contractor covered the contractor’s profit and

overhead; therefore, the costs are eligible for FEMA reimbursement.  On March 28, 2008, the Regional Administrator denied the appeal because the Applicant was not eligible for the cost to remove debris from private commercial property.  In addition, the Regional Administrator denied the Applicant’s request for reimbursement of its contractor’s profit and overhead because unit prices included in the contract may already reflect a profit mark-up.

Second Appeal

The Applicant argues that because it had completed its debris removal activities before it became eligible for financial assistance from FEMA, it was not aware of the requirement for FEMA to approve in advance debris removal from private property and FEMA should not penalize it for its failure to comply with the advance approval policy.  The Applicant reiterated arguments it raised in the first appeal.

Discussion

In accordance with 44 CFR §206.224(a), Debris removal, FEMA may provide assistance to remove debris from public and private property when it is in the public interest to do so.  Debris removal is in the public interest when it is necessary to: eliminate immediate threats to life, public health, and safety….  In addition, 44 CFR §206.223(a)(3), General work eligibility, states that to be eligible for Stafford Act assistance, an activity must be the legal responsibility of an eligible applicant.

The Applicant placed roll-off containers throughout the community to allow residents to remove disaster-related debris from their homes and properties.  FEMA reimbursed the Applicant the cost to remove debris that citizens placed in roll-off containers that were located on public property.  However, the Applicant placed roll-off containers on private commercial properties that were not immediately adjacent to residential areas.  It appears that the roll-off containers that were placed on private commercial property were for the use of the commercial property owners.  The Regional Administrator appropriately denied reimbursement for removing debris from commercial property because it was not in the public interest to do so.  Therefore, the Applicant is not eligible for reimbursement of $62,585 to cover the costs of roll-off containers that the Applicant placed on private commercial property during the debris removal operations.

The second issue concerns the Applicant’s request for reimbursement of $19,898 to pay its contractor’s profit.  In a letter dated July 2, 2007, the Municipal Services Manager for the Applicant’s contractor, Allied Waste, stated that in a meeting on June 28, 2007, the Applicant agreed to pay Allied Waste FEMA rates for flood debris cleanup work.  FEMA does not have established contract rates, so the basis for the rates is unclear.  There is no information in the file that indicates that the rates charged by the contractor already include profit. 

FEMA will reimburse reasonable contract costs, including profit.  FEMA accepts contract rates as reasonable when established through a competitive process that meets Federal procurement requirements described at 44 CFR § 13.36.  The information in the file indicates that the Applicant and its contractor negotiated the rates.  When an Applicant does not follow Federal procurement requirements, FEMA will base its reimbursement on an average of competitive rates for similar work in the area, historic contract rates; or FEMA will estimate a reasonable rate.  In this instance, I have determined that the contract rates including profit are reasonable.  The requested profit is based on a 15-percent markup on $132,658 in direct costs, which includes $62,585 in ineligible costs.  When applied to the cost of eligible work ($70,073), the eligible markup for profit is $10,511. 

Conclusion

I have reviewed all information submitted with the appeal and determined that the Applicant is eligible to receive an additional $10,511.  Therefore, I partially approve the appeal for $10,511.  By copy of this letter, I request the Acting Regional Administrator to take appropriate action to implement this determination.

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 CFR §206.206, Appeals.               

Sincerely,

/s/

Elizabeth A. Zimmerman

Assistant Administrator

Disaster Assistance Directorate

cc:  Tony Russell

       Regional Administrator

       FEMA Region VI