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Ellis Pool Complex Repair

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster1763-DR-IA
ApplicantCity of Cedar Rapids
Appeal TypeSecond
PA ID#113-12000-00
PW ID#10300
Date Signed2014-02-28T00:00:00

Conclusion: The Applicant sufficiently demonstrated that costs claimed for two contractors were associated with work within the approved scope of work to restore a pool complex and could be separated from ineligible costs associated with upgrades.  As to a third contractor’s costs, the work performed was neither project management nor engineering services.  The work was not directly related to the performance of eligible work and, therefore, the costs associated with that work, if eligible, would constitute DAC.  The documentation provided was not sufficient to support reimbursement as DAC.

Summary Paragraph

Flooding damaged the City of Cedar Rapids (Applicant) Ellis Pool complex.  FEMA prepared Project Worksheet (PW) 10300 for $551,198, including $3,750 in direct administrative costs (DAC), to fund repairs.  The Applicant restored the pool to its pre-disaster design but also completed enhancements and upgrades.  At project closeout, the Applicant requested reimbursement for $726,603, a cost overrun of $175,405.  FEMA determined that the Applicant failed to provide sufficient documentation allowing for eligible costs associated with work within the approved scope of work to be separated from ineligible costs associated with upgrades. FEMA closed out the project at the originally obligated amount.  The Applicant’s first appeal included documentation it asserted separated costs of upgrades from costs associated with work within the approved scope of work.  FEMA denied the first appeal, concluding that the documentation provided was insufficient.  The Applicant submitted a second appeal and provided additional documentation it contended allowed for a bifurcation of costs.

Authorities Discussed

  • Robert T. Stafford Disaster Relief and Emergency Assistance Act, § 406(e)(1), 42 U.S.C. § 5172(e)(1)

  • 44 C.F.R. § 206.203(d)(1)

Headnotes     

  • Under 42 U.S.C. § 5172(e)(1), FEMA is authorized to reimburse the cost of repairing, restoring, reconstructing, or replacing an eligible facility “on the basis of the design of such facility as it existed immediately prior to the major disaster.”

  • Under 44 C.F.R. § 206.203(d)(1), Public Assistance applicants may elect to make improvements to facilities being repaired or restored to its pre-disaster function;  if an applicant elects to make improvements, “the Grantee’s approval must be obtained” and “Federal funding for such improved projects shall be limited to the Federal share of the approved estimate of eligible costs.”

    • The Applicant provided sufficient documentation with respect to two contractors demonstrating the bifurcation of costs associated with work within the approved scope of work from ineligible costs associated with upgrades.

Appeal Letter

February 28, 2014

Mark Schouten
Administrator
Iowa Homeland Security and Emergency Management Division
7105 NW 70th Avenue
Camp Dodge, Bldg. W-4
Johnston, Iowa 50131-1824

Re:  Second Appeal—City of Cedar Rapids, PA ID 113-12000-00, Ellis Pool Complex Repair, FEMA-1763-DR-IA, Project Worksheet 10300

Dear Mr. Schouten:

This is in response to a letter from your office dated June 12, 2013, which transmitted the referenced second appeal on behalf of the City of Cedar Rapids (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) partial denial of claimed costs for engineering and project management services related to the repair of the Ellis Pool complex, resulting in a denial of $174,405.18 in additional project costs claimed by the Applicant.

As explained in the enclosed analysis, the Applicant provided sufficient documentation, with respect to two contractors, that allows design and project management costs associated with the approved project scope of work to be separated from those associated with project upgrades.  As to a third contractor’s costs, additional documentation is necessary to determine whether the costs may be reimbursed as direct administrative costs (DAC).  Therefore, I am partially granting the appeal for $94,755.80.  By copy of this letter, I am requesting the Regional Administrator to take appropriate action to implement this determination.  Specifically, I am requesting the Regional Administrator accept and consider any documentation the Applicant provides with its request for project closeout associated with the third contractor’s costs that could substantiate reimbursing those costs as DAC. 

Please inform the Applicant of my decision.  This determination constitutes the final decision on this matter pursuant to 44 C.F.R. § 206.206.

Sincerely,

/s/

Deborah Ingram
Assistant Administrator
Recovery Directorate

Enclosure

cc:  Beth Freeman
      Regional Administrator
      FEMA Region VII

Appeal Analysis

Background

From May 25, 2008 through August 13, 2008, severe storms and flooding caused damage throughout the State of Iowa.  During the incident, the Cedar River exceeded flood stage and the flooding damaged the Ellis Pool complex, which consists of three buildings supporting a main swimming pool and auxiliary wading pool and is owned and operated by the City of Cedar Rapids (Applicant).

FEMA prepared Project Worksheet (PW) 10300 for $551,198, including $3,750 in direct administrative costs (DAC), to fund the Ellis Pool repairs.  The Applicant completed the scope of work to restore the pool to its pre-disaster design as well as certain enhancements and upgrades to the facility.  At project closeout, the Applicant requested reimbursement in the amount of $726,603, a cost overrun of $175,405.  The Applicant’s claimed costs included repair costs, contract and force account DAC, engineering and design services, project management costs, and materials costs.  The Iowa Homeland Security and Emergency Management Division (Grantee) determined that the Applicant had completed an improved project and recommended that project funding be capped at the originally obligated amount of $551,198.  FEMA determined that the Applicant had failed to provide sufficient documentation allowing for the ineligible costs associated with the upgrades to be separated from the eligible costs associated with work within the approved project scope of work.  In August 2012, FEMA closed out the project at the originally obligated amount, $551,198.

First Appeal

The Applicant submitted a first appeal in a letter dated October 12, 2012, which the Grantee forwarded to FEMA in a letter dated November 29, 2012.  In its first appeal, the Applicant acknowledged that the Grantee had concluded at project closeout that documentation for two firms with which it contracted, a design firm and a consultant, did not adequately distinguish between costs for upgrades and work within the approved scope of work.  The Applicant asserted documentation that it provided with the appeal (1) identified the design firm’s costs associated with the upgrades, (2) showed its consultant did not perform any work related to the upgrades, and (3) documented costs associated with a third firm.  The Grantee supported the appeal, stating that the documentation the Applicant provided had not been available at the time of project closeout.

The FEMA Region VII Regional Administrator denied the first appeal in a letter dated March 11, 2013, concluding that the Applicant failed to provide sufficient documentation to allow contractor costs for the approved scope of work for the Ellis Pool complex to be separated from those for upgrades.  With regard to one contractor the Applicant hired, Novak Design Group, the Regional Administrator noted that at project closeout the Applicant did not provide any documentation to allow for such a breakdown.  Submitted in conjunction with its appeal, the Applicant provided a single-page letter from Novak Design dated September 28, 2012, that separated out its upgrade costs.  In rejecting the sufficiency of this documentation, the Regional Administrator noted that the letter did not include any source documentation, such as timesheets, or an explanation of the methodology used to separate out costs associated with upgrades.  As to another contractor, Howard R. Green Company, the Regional Administrator expressed concern that the firm, which the Applicant hired to complete damage assessments and help develop scopes of work for multiple projects within its jurisdiction, signed multiple contract amendments with the Applicant, extending deadlines and increasing incurred costs, without explanation. The Regional Administrator also noted that, at closeout, the Applicant had not adequately separated Howard R. Green costs associated with improvements from those associated with work within the approved scope of work.  As for the third contractor, Ryan Companies US, Inc., the Regional Administrator noted that an invoice the Applicant provided did not include any source documentation, such as timesheets.  The Regional Administrator concluded that the Applicant failed to provide any explanation of how the invoice provided related to the approved scope of work.  Finally, the Regional Administrator stated that the cost estimate developed by FEMA using the Cost Estimating Format (CEF), which allows a total of $87,485 for project management and design costs, exceeds the amount the Applicant requested for such services provided by Novak Design and Howard R. Green.

Second Appeal

The Applicant submitted a second appeal in a letter dated May 16, 2013, which the Grantee transmitted to FEMA in a letter dated June 12, 2013.  In its second appeal, the Applicant provided a second letter from Novak Design dated May 8, 2013.  In it, Novak Design acknowledged miscalculations in its prior letter from September 2012 and, based on new figures, asserts that, out of a total of $67,723.65 in professional services billed to the Applicant, $3,656.25 represented costs associated with “non-sustainable upgrades.”    The Applicant also included timesheet records provided by Novak Design.  The Applicant now claims a total of $64,067.40 for costs associated with Novak Design –  $67,723.65 less the $3,656.25 in “non-sustainable upgrades.”

Regarding Howard R. Green, the Applicant asserts that that contractor’s work related only to performing damage assessments and developing scopes of work at multiple locations, all of which related to only the “damaged elements” of such locations, not improvements or upgrades.

As for Ryan Companies, the Applicant’s construction management firm, the second appeal included eleven additional invoices and a spreadsheet summarizing costs associated with the Ellis Pool project.  The Applicant claims a total of $30,688.40 in Ryan Companies’ costs and states that it is not claiming $184.00 identified as related to “sustainable upgrades.”

Finally, the Applicant notes that costs it is claiming for project management and design associated with Novak Design and Ryan Companies (rather than Howard R. Green) – $64,067.40 and $30,688.40, respectively – exceeds the $87,485 CEF estimate for project management and design costs.  The Grantee supports the Applicant’s appeal.

Discussion

Under Section 406(e)1) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), FEMA is authorized to reimburse the cost of repairing, restoring, reconstructing, or replacing an eligible facility “on the basis of the design of such facility as it existed immediately prior to the major disaster.”[1]  Public Assistance (PA) applicants may elect to make improvements to facilities being repaired or restored to its pre-disaster function.  If so, “the Grantee’s approval must be obtained” and “Federal funding for such improved projects shall be limited to the Federal share of the approved estimate of eligible costs.”[2]  PA guidance further explains that any improved facility must have the same function and at least the capacity of the pre-disaster facility.[3]  In addition:

Funding for such projects is limited to the Federal share of the costs that would be associated with repairing or replacing the damaged facility to its pre-disaster design, or to the actual costs of completing the improved project, whichever is less.  If eligible repair or replacement costs exceed the original estimate and costs can be separately documented (i.e., if approved costs can be tracked separately from improvement costs), the applicant may appeal the amount of the grant.[4]

With the Ellis Pool project, the Grantee concluded that the Applicant had completed an improved project, and it recommended that the project amount be capped at $551,198, the originally obligated amount, specifically because, at project closeout, costs could not be split between ineligible upgrade costs and costs associated with work within the approved scope of work.  This recommendation was consistent with the general approach to improved project funding outlined in applicable regulations, which is to limit federal funding to the federal share of the approved estimate of eligible costs.  As the Public Assistance Guide explains, however, an applicant may appeal the amount of the grant for an improved project, provided that eligible repair costs can be documented and tracked separately from ineligible improvement costs.[5]

Here, the Applicant has adequately demonstrated that such a breakdown of costs for the Ellis Pool project is possible.  As to the Novak Design costs, the Applicant, in its first appeal, provided a one-page letter from Novak Design stating that its work on “sustainable upgrades” amounted to $3,823.65.  Such upgrades, the letter stated, included canopy structures, preparing and painting a wood trellis, and developing “an exterior color scheme.”  The remaining work, categorized as “flood recovery,” amounted to $58,900.  The Applicant provided no additional documentation supporting this claim on first appeal.  On second appeal, however, the Applicant included a follow-up letter from Novak Design, along with timesheets for the three employees that worked on the upgrades.  The follow-up letter corrects a “discrepancy” and provides new figures.  The letter lists the three staff members, their hours worked, and their rates for work performed on the upgrades.  In Novak Design’s amended figures, the upgrades amount to $3,656.25, and the remainder amounts to $64,067.40.  The timesheets provide sufficient backup documentation for those figures.  They track each individual employee’s work associated with upgrades by noting specific hours worked on “non-sustainable upgrades.”  This allows for a separation of costs associated with upgrades from costs associated with work within the approved scope of work.   Given the time-sheets’ descriptions of work associated with upgrades versus work associated with the approved scope of work, the Applicant has demonstrated that it adequately tracked improvement costs versus approved costs related to Novak Design.

The Applicant’s documentation for claimed costs associated with Ryan Companies is similarly sufficient.  In its first appeal, the Applicant provided documentation in the form of an invoice prepared by Ryan Companies totaling $24,771.75.  In its second appeal, the Applicant provided additional invoices and vouchers, as well as a spreadsheet summarizing total costs for Ryan Companies.  The Applicant now claims a total of $30,688.40, stating that it is not claiming $184.00 associated with “sustainable upgrades.”  The additional invoices and vouchers provide sufficient detail to separate costs associated with upgrades from costs associated with work within the approved scope of work.  The Applicant states that line items marked “PRE005-S” represent work associated with upgrades.  There is one such line item in the Applicant’s documentation, totaling $184.00.   Because the Applicant’s documentation indicates that it tracked ineligible upgrade costs separately from eligible costs for work within the approved scope of work, the Ryan Companies’ costs are allowable.

As to the Howard R. Green costs, the Applicant provides its original contract and amendments to the contract which list estimated fees by facility.  The total estimated fee for the Ellis Pool shown in the documents is $15,760.  The scope of work of the Applicant’s contract with Howard R. Green is for professional services “to provide an opinion of probable cost associated with the post flood reconstruction of buildings and other structures …”  The Applicant explains that Howard R. Green completed damage assessments of the Ellis Pool and other facilities  and the work performed was unrelated to upgrades.  Assuming arguendo Applicant’s assertion, the work Howard R. Green performed was neither project management nor engineering services.  As the work was not directly related to the performance of eligible work, the costs associated with that work, if eligible, would constitute DAC.  DAC includes costs that can be tracked, charged and accounted for directly to a specific project.  Such costs must be reasonable and properly documented in order to qualify for reimbursement.  The Applicant has not provided a detailed description of the work Howard R. Green performed with respect to the Ellis Pool and associated costs.  Without such a description, FEMA is unable to analyze the eligibility of the Howard R. Green DAC.

Conclusion

The Applicant has provided sufficient documentation with respect to Novak Design and Ryan Companies to enable FEMA to differentiate Ellis Pool project costs associated with upgrades from costs associated with work within the approved scope of work.  Accordingly, the Applicant should be reimbursed for the costs associated with work within the approved scope of work performed by those contractors (specifically, $64,067.40 for Novak Design and $30,688.40 for Ryan Companies).    As to the Howard R. Green DAC, the Applicant has not provided documentation that would allow FEMA to properly analyze whether the $15, 760 listed in the contract is an actual cost costs eligible in accordance with FEMA policy.  The Applicant may submit documentation in support of the eligibility of the $15,760 in DAC for consideration at project closeout. 

[1]  See 42 U.S.C. § 5172(e)(1).

[2]  See 44 C.F.R. § 206.203(d)(1).

[3]  See FEMA 322, Public Assistance Guide (June 2007) (PA Guide), at 110.

[4]  Id.

[5]  Id.