Citation:     FEMA-1915-DR-SD, Brule County, Embankment Erosion, Project Worksheet (PW) 847

Cross-
Reference: Reasonable Cost, Work Eligibility

Summary:  From March 10, 2010 to June 20, 2010, extensive flooding damaged infrastructure in several counties in South Dakota.  In Brule County (Applicant), floodwater eroded the embankment of Boyer Bottom Road in three locations.  On August 5, 2010, FEMA inspected the sites and prepared PW 847 for the amount $44,270 for repair of the embankment.  FEMA subsequently determined, based on a road sign that indicated minimal maintenance on the road and evidence of slope failures in the surrounding area, that the road is unstable and not maintained, and is therefore ineligible for assistance.  On January 4, 2011, the Applicant submitted a first appeal, which stated that that the road had no pre-existing instability and was regularly maintained.  In support of this claim, the Applicant submitted maintenance records and aerial photographs to demonstrate the condition of the road prior to the declared disaster.  The FEMA Regional Administrator approved the first appeal, but noted that the Applicant did not competitively bid the work.  As the work was not completed in compliance with federal contract procurement regulations, the Regional Administrator limited the eligible amount to reasonable costs, estimated to be $12,181.  In the January 19, 2012, second appeal, the Applicant claims that its procurement process was consistent with local and state laws, which require competitive bids only when the projected costs exceed $50,000.  The Applicant maintains that solicitation of multiple bids would have resulted in an unreasonable delay to the start of work.  Further, the Applicant contends that $12,181 is insufficient to complete the repair and requests approval of an additional $31,916.  The Applicant has not submitted a detailed scope of the work completed, nor does the submitted documentation demonstrate that the work was restricted to repair of the damaged sites.  In the absence of a scope of work, it is impossible to verify that the Applicant’s claimed costs were both reasonable and appropriate to repair the eroded embankment.

Issue:         In the absence of competitive bids or multiple quotes, has the Applicant demonstrated that the invoiced costs are reasonable for the work necessary to repair the damage?

Finding:    No.  FEMA has the flexibility to review the circumstances for the noncompliance and take appropriate remedial action.  If FEMA determines costs charged in a contract are not reasonable, FEMA can take action to establish a reasonable cost and limit reimbursement.

Rationale: Title 44 of the Code of Federal Regulations (44 CFR) §13.36, Procurement; 44 CFR §13.36(d)(4), Procurement, Methods of procurement to be followed; 44 CFR §13.43(a), Enforcement, Remedies for noncompliance