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Road Repairs

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

DisasterFEMA-0979-DR
ApplicantImperial County Department of Public Works
Appeal TypeThird
PA ID#025-91025
PW ID#Multiple DSRs
Date Signed1998-06-30T04:00:00
PURPOSE: Respond to third appeal submitted by the Imperial County Public Works Department concerning the deobligation of funding from several road repair DSRs.

DISCUSSION: Heavy rains and flooding in February 1993 caused damages to over 400 miles of county roads and five landfill sites. FEMA prepared 22 DSRs for $13,908,991 to cover repairs to the roads and landfills. The applicant requested approval of alternate projects in lieu of performing the approved repairs. The Regional Director denied this request on the basis that alternate projects could only be approved when the function of a facility is abandoned. The applicant appealed this determination in a January 5, 1995, letter. The Regional Director upheld the initial determination. Following the submission of a second appeal, FEMA agents visited the site to determine if the original scopes of work described in the DSRs were appropriate. The result of the visit was the deobligation of $5,660,822 of eligible funds. The applicant appealed the deobligations based on proposed methods of repair as well as estimates provided by FEMA for various costs and allowances. The second appeal determinations are found to be reasonable and consistent with industry standards and practices.

RECOMMENDED ACTION: Sign the letter informing the GAR of the decision to deny the third appeal.

Appeal Letter

June 30, 1998

Mr. Gilbert Najera
Governor's Authorized Representative
Governor's Office of Emergency Services
74 North Pasadena Avenue, West Annex. Third Floor
Pasadena, California 91103

Dear Mr. Najera:

This letter is in response to your October 29, 1997, submittal of the Imperial County Public Works Department's third appeal of FEMA's decision to deobligate funding from several of their road repair Disaster Survey Reports (DSRs) under FEMA-0979-DR-CA.

As explained in the enclosed analysis, I have determined that the estimates provided in the second appeal are accurate and reasonable. It is important to note that the DSRs are prepared to provide estimates of eligible funding. The DSRs are not intended to dictate methodology of repair. Although the DSRs were carefully prepared based on industry standards and practices, final eligible costs are based upon actual cost incurred to accomplish the approved scope of work. There is no basis for approving additional funding at this time. Therefore, I am denying this appeal.

Please inform the applicant of my determination, which constitutes the final level of appeal in accordance with 44 CFR 206.206(e).

Sincerely,
/S/
James L. Witt
Director

Enclosure

cc: Martha Z. Whetstone
Regional Director
FEMA Region IX

Appeal Analysis

BACKGROUND
Heavy rains and flooding in February 1993 resulted in the Presidential declaration of disaster FEMA-0979-DR-CA. The Federal Emergency Management Agency (FEMA) prepared twenty-two (22) damage survey reports (DSRs) for the Imperial County Public Works Department to cover damages to over 400 miles of county roads and loss of cover on the walls of landfill cells at five sites. The total amount of eligible funding provided under these DSRs was $13,908,991. Most of the damaged roads were gravel roads for which the approved scope of work included grading the roads, rolling the graded road, placing 1-1/2 inches of gravel and spreading and rolling the gravel. The applicant made minimal repairs to the damaged roads and landfill sites and requested alternate projects in lieu of the approved repairs. These alternate projects included improving roadways located closer to more urbanized areas and purchasing equipment. The applicant indicated that the damaged roads and landfills would continue to be used for their pre-disaster functions. With legal advice from the Office of General Counsel, the Regional Director denied the applicant's request in a letter dated September 12, 1994. The Regional Director determined that because the approved grant was for the cost to repair damaged roads and landfill sites, and these sites continued to be used, there was no basis to approve an alternate project. Alternate projects could only be approved when the function of a facility was abandoned.

First Appeal
The applicant appealed this decision in a letter dated January 5, 1995. The basis for the appeal was the applicant's understanding that neither the regulations, Title 44 of the Code of Federal Regulations (CFR), section 206.203(d)(2), nor the Stafford Act require that an applicant abandon a damaged facility in order to request an alternate project. The applicant contended that FEMA's interpretation that a facility must be abandoned before an alternate project can be approved is unreasonable because no local government could give up the use of a public facility such as a road simply because it was damaged.

The Regional Director denied the first appeal in a June 14, 1995, letter. The Regional Director determined that because the roads and landfill continued to serve their pre-disaster functions, the costs to repair these facilities could not be used by the applicant for an alternate project. This letter further states,The election by the applicant to pursue alternate projects in the instant case indicates that the repair work which was the basis of the subject DSRs has either not been performed, in whole or in part, or has been performed at a lesser cost. This situation, in the applicant's opinion, frees up these disaster relief funds for alternate uses. Instead, it is our opinion that this situation raises questions concerning the disaster-related need for the work and/or the accuracy of the repair cost estimates.
No changes were made to the eligible amount of funding at that time.

Second Appeal
The applicant submitted a second appeal dated October 3, 1995. This appeal was based on the same issues previously raised, namely, the question of the statutory and regulatory basis of denying the alternate project and the legislative intent of Congress in providing for alternate projects. On June 11-14, 1996, FEMA personnel and the technical assistance contractor conducted a site visit. The purpose of this visit was to meet with the applicant in order to gain a better understanding for the basis of the appeal, and to determine if the original scope of work was appropriate. FEMA inspectors viewed the current condition of the roads along with maintenance records and other pertinent information.

FEMA responded to the second appeal in a letter dated April 1, 1997. The second appeal response upheld the first appeal determination of ineligibility. The results of the site visit and subsequent review of the repair scopes of work indicated that, in general, the cost estimates for the gravel and paved road repair were excessive. The following is a summary of the second appeal determinations:
  • Compaction: FEMA determined that use of a roller to achieve 90 percent gravel compaction was excessive when the specifications can be achieved with the water truck and other gravel trucks.
  • Use of an On-site Foreman: FEMA determined that allowance for a single skilled Foreman on the re-graveling operation should be sufficient as opposed to a separate individual for each site.
  • Compensation for Travel Time: FEMA noticed that the hourly pay for travel time to and from the work site for all labor and equipment operators was calculated on the total of equipment as well as labor. The equipment that remains on-site either at the pit or at the regrading operation after the actual working hours should not be included in this calculation.
  • Overhead and Profit Allowance: FEMA stated that 30% for overhead and profit was excessive when 15 percent is suggested as an industry standard.
  • Traffic Control: FEMA stated that using 100 traffic cones per mile would require a crew to place and continually pick-up 100 cones for a fluid operation, such as grading, which is moving at one to two miles per hr. Warning signs and flashing lights, instead of cones, have historically been used and are widely used today.
  • Engineering and Inspection Allowance: FEMA determined that engineering and inspection rates of 6-14 percent were excessive because 2-3 percent is suggested as appropriate for the level of effort.
  • Production Rate: FEMA stated that the DSR cost estimates were based on an eight hour work day with an assumed production rate of one mile per day for both the grading and shaping operation and the re-graveling operation. FEMA determined that a more realistic estimate would be a production rate of one-half mile per hour, or 4 miles per day.
Based upon these determinations, FEMA deobligated $5,660,822.

Third Appeal
OES transmitted the applicant's third appeal with a letter dated October 29, 1997. The applicant contends, "The deobligation of funds was nothing more than FEMA's attempt to punish the County for appealing the FEMA denial of its alternate projects request." The applicant appeals the deobligation of funds and addresses FEMA's justifications for the various reductions.

DISCUSSION
In their third appeal, the applicant discusses at great lengths the role of the DSR. The applicant opines that the second appeal deobligations were meant as a punitive response to their appeal for the eligibility of alternate projects. The applicant questions FEMA's motives for conducting site visits and reviewing the original scopes of work as well as FEMA's justifications for deobligations.

When evaluating the merits of any appeal, FEMA affords all due consideration to an applicant before a determination is made. In this instance, documentation alone was insufficient for completing a thorough and accurate second appeal analysis. The purpose of the site visit was to meet with the applicant in order to gain a better understanding for the basis of their appeal. Because the applicant requested an alternate project, and did not intend to repair the damaged roads or discontinue their use, it was appropriate for FEMA to view the current condition of the roads, along with maintenance records, etc. to determine if the original scope of work was appropriate. The issue of the appropriateness of the original scope of work is still a relevant issue as the applicant has failed to repair or abandon the damaged roads five years after the disaster declaration.

Methodology for Repairs
The applicant disputes FEMA's determinations concerning appropriate methods of repair. The repair mesped to using a roller, and that one skilled Foreman on the re-graveling operation should be sufficient as opposed to a separate Foreman for each site. FEMA's intention is not to dictate the methodology employed for road repairs, but rather to provide reasonable estimates for costs of repairs based on industry standards and accepted practices. It is the applicant's responsibility to procure bids from contractors that reflect the scopes of work and cost estimates provided in the various DSRs.

With respect to the aforementioned issues, FEMA has determined that the second appeal analysis provided accurate estimates of costs and reasonable methods of repair. The use of water and gravel trucks to achieve the 90 percent compaction specification reflects an accepted industry practice for projects with similar scopes of work. Also, providing funding for a separate foreman at each site is excessive for the scope of work. FEMA recognizes that, to some extent, the methods of repair are at the discretion of the contractor and are dependent on how the contracts are let. The estimates on the DSRs are prepared as carefully as possible, but those figures are not necessarily the figures that will be approved for the projects. However, the applicant should use these figures as guidelines when soliciting bids. After bids are solicited, construction DSRs can be written, reviewed, and approved for the appropriate amounts. Thus, if the applicant can demonstrate that a roller and/or a separate foreman for each site are required by the contractors and are cost-effective methods of repair, eligible funding for such costs will be reviewed by FEMA to determine if the correct amount of funding has been provided based on the contract bids.

Compensation for Travel Time
The applicant concurs with FEMA's second appeal determination that only actual working hours should be included in calculating costs. It appears that the applicant's issue with the second appeal determination is that "FEMA misunderstands the travel time of one way home at the end of the day." The applicant explains that this is the travel time paid to the independent truckers that would be used to haul gravel material. FEMA recognizes that travel time for the independent truckers is dependent upon the contractor. This is an issue that would be resolved in the contract. As stated above, FEMA expects that the applicant will attain a reasonable and cost-effective contract after soliciting bids. Contracts will be reviewed by FEMA for cost-effectiveness.

Overhead and Profit Allowance
The applicant states that although the industry standard for overhead and profit is 15 percent, they do not control what a contractor will apply. The applicant explains, "Based on past history in the Valley, a norm of 20-25 percent and upwards to 30 percent when Federal Participation is involved is common." The applicant continues that there is only one firm locally that has the equipment and personnel required to bond and complete repairs to over 400 miles of road. Although the magnitude of work may attract out-of-County contractors, the scope of work does not include mobilization/ demobilization. The applicant states that the out-of-County contractors are forced to include this expense in overhead and profit, accounting for overhead and profit rates higher than the industry standard.

Eligible funding is based on industry norms and standard practices to ensure reasonable costs. Pursuant to the Office of Management and Budget (OMB) Circular A-87, "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. The question of reasonableness is particularly important when governmental units or components are predominately federally-funded." The Circular continues that in determining reasonableness, consideration should be given to market prices for comparable goods or services and whether the cost is of a type generally recognized as ordinary and necessary for the operation of the governmental unit or the performance of the Federal award. Therefore, FEMA will not provide for overhead and profit allowances that exceed the industry standard. Specific costs that may be attributable to increased overhead and profit allowance, such as mobilization/ demobilization, should be identified as a separate line item on the contract bid with justification. Such costs will be reviewed for eligibility. Furthermore, FEMA finds no justification for an overhead and profit allowance that doubles the industry norm when Federal participation is involved. This is considered an abuse of Federal funding and is in violation of OMB Circular A-87. Scopes of work and eligible costs should not be contingent upon Federal funding and, as such, costs should not be inflated when an applicant is receiving funding from the Federal government.

Traffic Control
The applicant agrees with FEMA's second appeal determination that warning signs and flashing lights, instead of cones, should be employed for traffic control.

Engineering and Inspection Allowance
The applicant indicates that the 6-14 percent rate came from FEMA's engineering and inspection curves. While the applicant recognizes that 14 percent may be too high, they state that 2-3 percent is insufficient for the magnitude of the project. The applicant explains that the inspection also includes density testing, which will be contracted to an independent firm, resulting in an expense for the testing as well as for the inspection and compliance to contract specifications.

The 6-14 percent rate presented by the applicant was attained from the FEMA Engineering and Design Services Curve for projects of above average complexity and non-standard design. FEMA policy dictates that for work requiring only basic construction inspection service, a fee that does not exceed 3 percent of construction costs will be used for the DSR estimate for an engineering and inspection allowance. The scope of work described in the subject DSRs represents such a case. The 2-3 percent found eligible following the second appeal included some inspection costs. FEMA recognizes that some additional funding may be required for routine field testing, therefore, an additional 1 percent of construction costs will be approved for such services.

Production Rate
The applicant states that FEMA's production rate of 4 miles per day, based on the County's re-graveling schedule, is unrealistic. The applicant explains that when the County re-gravels a road, there is already a gravel surface to which more aggregate is added. The applicant continues that heavy tractors and trailers traveling on the roads after they were saturated rutted the roads and pounded the gravel into the subgrade, rendering it unusable. The applicant states that the production rate will be entirely up to the contractor who, as previously explained, will develop a production rate that he determines will ensure that the job meets specifications so as to avoid redoing the job at his own expense.

In their second appeal letter, the applicant stated that they were unwilling to abandon "damaged but still usable public facilities (the roads)" as a condition of approval for alternate projects. The applicant had not performed the repairs provided by the subject DSRs at the time of submittal of the third appeal. Furthermore, the applicant's third appeal statement that use of the roads by heavy machinery has rendered the aggregate unusable contradicts the applicant's description of the various facilities during first and second appeals. FEMA will not provide funding for additional damages resulting from an applicant's failure to perform repairs within the allowable timeframe. As suchn rahe June 1996, site inspection.

The roads were damaged five years ago, and the applicant made only minimal repairs to the roads during that five-year time frame. Any subsequent damage caused by a failure to make repairs in a timely manner are not eligible for FEMA funding. According to the applicant, and verified by FEMA inspection, the roads are still in use; therefore, the damage could not have been exceptionally severe.

CONCLUSION
The second appeal determinations are reasonable and consistent with industry standards and practice. Actual costs incurred to accomplish the approved scope of work will be reviewed following the completion of repairs. Any changes in eligible funding will be made at this time.