Debris Unit Price
Appeal Brief
Appeal Letter
Appeal Analysis
Citation: FEMA-1354-DR-AR, City of Pine Bluff, PW 411-1, Debris Unit Price
Cross Reasonable cost, debris unit price, times for appeals
Reference:
Summary: Following the ice-storm disaster of December 2000, the City of Pine Bluff solicited proposals for the removal of debris from City property. A contract was awarded to David Mitchell Construction, Inc. (DMC) for a unit price of $19.18 per cubic yard (CY) for all debris removed and processed. This was higher than many other offerors that had bid on the work. The method of execution of the work was changed by agreement between the City and DMC after contract award but before the start of work. The change eliminated double handling and the reduction of the debris but the price remained the same. The Regional Director reduced the approved price to $10 per CY as a more reasonable price. The Regional Director denied a first appeal for the full contracted price because it had been submitted beyond the 60-day deadline for appeal submission. A second appeal of that denial was submitted arguing that FEMA should consider the unit-price issue.
Issues: Should FEMA have considered the unit-price issue raised by Pine Bluff.
Findings: No. The unit-price issue was raised after the 60-day deadline for appeal submissions.
Rationale: A review of the facts in this case confirms that Pine Bluff raised the unit-price issue after the 60-day deadline set forth in 44 C.F.R. §206.206(c)(1). With that said, even if the issue had been raised in a timely fashion, we would have determined that the unit price of $19.18 per CY was not reasonable and that the reasonable price for the work is $10 per CY. The change in the work elements was significant enough that the project should have been re-advertised. OMB Circular A-87, referenced by 44 CFR 13.22, requires that costs be necessary and reasonable for proper and efficient performance and administration of Federal awards. The substituted work was either required in the base contract or was an insignificant portion of the total project such that the original unit price was unreasonable.
The initial appeal submitted by the City of Pine Bluff on May 4, 2001, concerned a different issue than payment rates for debris. The issue of that letter was a request to restore eligibility for 144,363 cubic yards (CY) of debris that had been found ineligible because it was believed to have been removed from private property. Private property debris pick-up was not authorized in this disaster. Subsequently, the Regional Director found that 117,544 CY of the questioned debris were eligible. It is our understanding that the City has agreed with that figure and the issue of the quantity of eligible debris is not part of this second appeal.
In a June 29, 2001, letter to the State, the City added another issue to their first appeal. That issue was a request to be reimbursed for the difference between the contracted rate of $19.18 per CY and the approved rate of $10 per CY for all eligible debris. The $10 per CY rate was determined to be reasonable by the Disaster Recovery Manager and was determined by reviewing the prices proposed by the 12 offerors and selecting the rate of the lowest proposal. In a letter of July 11, 2001, the Regional Director determined that the issue of the cubic yard rate was submitted beyond the 60-day deadline for appeals and accordingly denied that portion of the appeal. On September 5, 2001, the City initiated a second appeal of FEMA's refusal to accept the appeal for the cubic yard rate. A review of the facts in this case leads me to confirm that FEMAs refusal to accept the appeal for the cubic yard rate was correct, as the issue was raised after the 60-day deadline for appeals set forth in our regulations. See 44 C.F.R. §206.206(c)(1). As such, this appeal is denied. Nevertheless, I note that our formal consideration of the issue would not have affected the substantive outcome. For your information, please see the following discussion of the unit-price issue.
DISCUSSION Unit Price
The reduction in the cubic yard rate by FEMA was based on a determination that a change in the method of execution of work made the originally bid rates inappropriate for the work actually accomplished. On December 21 to 26, 2000, the City published a request for proposals for debris pickup and disposal within the City of Pine Bluff. The work was to consist of six elements that were to be priced per cubic yard of debris processed. The work elements were:
Element Unit
I. Pick up debris and haul to temporary site CY
II. Process at temporary site CY
III. Haul to disposal site within the City or CY
Haul to disposal site outside the City CY
IV. Stump removal and disposal (five different sizes of stump) EA
V. Fill dirt to fill stump holes CY
VI. Miscellaneous services. HR
David Mitchell Construction, Inc. (DMC) was chosen by the City primarily because of its promise to employ local firms as subcontractors although its prices were not the lowest in all categories. DMC's price was the second lowest for just the first two elements ($4.43 vs $4.25), was substantially higher for the secondary haul element, and was very much lower for stump removal and disposal. The total unit price in DMC's contract for handling debris was $19.18 per CY. This did not include any amounts for the last three elements in DMC's proposal.
Before the start of work, the City and DMC agreed to change the method of execution by eliminating the temporary staging sites and the reduction process. The remaining work consisted of picking debris up from public property and transporting it directly to a landfill outside the City. However, the price remained the same at $19.18 per CY. The claimed justification for the price staying the same was that DMC would substitute removal of dangerous hangers and removal of stumps for the eliminated staging and reduction process. DMC explained that this arrangement was beneficial to the City because stump removal would have been an extra cost item and could have resulted in a considerable expense to the City. They also said that the hanger removal would have been a large extra expense as a miscellaneous service to be paid at an hourly rate for equipment and labor. They claimed that hanger removal was not part of the base contract.
This justification is flawed on many counts. First, hanger removal (any limbs larger than 2" diameter) was, in fact, required by the contract in Article III Scope of Work on page 3. Second, the offer to remove stumps for free also has little value because it appears to be based on a misunderstanding of the eligibility of stump removal as an extra cost item. Stumps are only an extra cost item when an uprooted stump must be dug out and hauled away. Otherwise the tree is cut flush with the ground and added to the debris pile and there is no cost beyond that attributed to the volume of the stump. A statement by a Pine Bluff Project Supervisor, Mr. Jimmy O'Fallon, that there could be "over a million small diameter stumps in the City" greatly exaggerated the cost risk that the City claimed to be concerned about. Most of such stumps would not have been eligible for any extra payment.
The third flaw concerns the amount of hauling work required. The original price schedule contained two haul trips, one to the staging site(s) and one from the staging site(s) to final disposal. Overlooking for the moment the very high price quoted by DMC for the second trip ($12.75 vs $5.00 for the next higher bidder), the elimination of the staging sites and reduction process should have reduced the price for the final haul to zero. Mike Mitchell, President of DMC, stated in an affidavit "Our firm was still required to haul the debris approximately the same distance." This means that the price for the pickup and haul to the landfill should have been $5.00 per CY, $3.00 plus $2.00 tipping fee. After FEMA was informed of the change in the method of execution of the work, the City was told by FEMA that the reimbursement rate would be $5.00 per CY. After some meetings with FEMA, State Emergency Management, and the City concerning the changed method of execution and the method of proposal evaluation, the City was told by FEMA that the eligible reimbursement would be $10 per CY. This rate had been determined by reviewing the prices proposed by the 12 offerors and selecting the rate of the lowest proposal.
The "Common Rule" regulations, 44 CFR §13.22 and by reference OMB Circular A-87, Attachment A, paragraph C.1.a., require that eligible costs be necessary and reasonable for the performance of the work. The change in method of execution of work from that described in the solicitation, and thereby what was bid on, makes the $19.18 per CY an unreasonable unit price. The following analysis gives the basis for this determination. When considering how the unit price is to be applied to the volume of debris, it must be noted that the total unit price would not have been multiplied times the total volume of unprocessed debris. The pricing schedule in the solicitation for proposals clearly indicated that the debris was to be picked up and taken to a temporary site, reduced by grinding and then hauled to a landfill, either inside or outside the City. The price for pickup, initial haul, and grind, $4.43 per CY in the proposal of DMC, would be applied to the total volume and the remainder of the unit price, $14.75 per CY for final haul and tipping fee, would be applied to approximately one fourth of the total volume. Grinding normally reduces vegetative debris to one fourth of the original volume. The result of these two calculations is the same as a unit price of $8.12 per CY times the total volume of debris. Allowing for variations in the f City also has not provided an adequate explanation of how certain portions of the proposal (the secondary haul to the landfill) were not considered during the evaluation process and how and why the method of execution of work was changed without a corresponding change in price. If the unit price for the secondary haul had been included in the evaluation, the ranking of the bidders would have changed markedly. The change that was made would normally require a re-solicitation of bids for the new method of execution and price schedule.
CONCLUSION
The unit price of $19.18 per CY is determined not to be reasonable. The claimed substitution of work items does not justify keeping the unit price at $19.18 per CY. A unit price of $10 per CY is determined to be reasonable for the work performed.
Appeal Brief
| Disaster | FEMA-1354-DR |
| Applicant | City of Pine Bluff |
| Appeal Type | Second |
| PA ID# | 069-55310-00 |
| PW ID# | 411-1 |
| Date Signed | 2002-07-19T04:00:00 |
Cross Reasonable cost, debris unit price, times for appeals
Reference:
Appeal Letter
July 19, 2002
Mr. W. R. Harper
Governor's Authorized Representative
State of Arkansas
P.O. Box 758
Conway, Arkansas 72033-0758
Re: Second Appeal - City of Pine Bluff, PA-ID #069-55310-00, FEMA-1354-DR-AR, Debris Unit Price, PW 411-1
Dear Mr. Harper:
This is in response to your letter of February 20, 2002, to Ron Castleman, Director of Region VI of the Federal Emergency Management Agency (FEMA).
The City of Pine Bluff was affected by the ice storms of December 2000 resulting in a major disaster declaration by the President (FEMA 1354-DR-AR) on December 29, 2000. The City awarded a contract to David Mitchell Construction, Inc. for the pickup and disposal of ice-storm debris from public property at a unit price of $19.18 per cubic yard (CY). FEMA subsequently approved a project worksheet for eligible debris at the rate of $10 per CY. By letter of May 4, 2001, Pine Bluff appealed FEMAs decision regarding the quantity of eligible debris. In a June 29, 2001 letter the City sought to supplement its appeal raising the issue of the debris removal unit price. FEMA subsequently declined to consider the unit-price issue because it was untimely. Pine Bluff has now appealed FEMAs refusal to consider the unit-price issue.
I reviewed the facts in this case and determined that the unit-price issue was raised after the 60-day deadline for appeals set forth in 44 C.F.R. §206.206(c)(1). Consequently, this appeal is denied. Even if the unit-price issue had been raised in a timely fashion I would have determined that the requested unit price of $19.18 per CY was unreasonable and that the approved $10 per CY is a reasonable unit price. The enclosed Appeal Analysis explains the basis for this determination.
Please inform the applicant of my decision. My determination constitutes the final decision on this matter as set forth in 44 CFR §206.206.
Sincerely,
/S/
John R. D'Araujo Jr.
Assistant Director
Readiness, Response and Recovery Directorate
Enclosure
cc: Ron Castleman
Regional Director
FEMA Region VI
Mr. W. R. Harper
Governor's Authorized Representative
State of Arkansas
P.O. Box 758
Conway, Arkansas 72033-0758
Re: Second Appeal - City of Pine Bluff, PA-ID #069-55310-00, FEMA-1354-DR-AR, Debris Unit Price, PW 411-1
Dear Mr. Harper:
This is in response to your letter of February 20, 2002, to Ron Castleman, Director of Region VI of the Federal Emergency Management Agency (FEMA).
The City of Pine Bluff was affected by the ice storms of December 2000 resulting in a major disaster declaration by the President (FEMA 1354-DR-AR) on December 29, 2000. The City awarded a contract to David Mitchell Construction, Inc. for the pickup and disposal of ice-storm debris from public property at a unit price of $19.18 per cubic yard (CY). FEMA subsequently approved a project worksheet for eligible debris at the rate of $10 per CY. By letter of May 4, 2001, Pine Bluff appealed FEMAs decision regarding the quantity of eligible debris. In a June 29, 2001 letter the City sought to supplement its appeal raising the issue of the debris removal unit price. FEMA subsequently declined to consider the unit-price issue because it was untimely. Pine Bluff has now appealed FEMAs refusal to consider the unit-price issue.
I reviewed the facts in this case and determined that the unit-price issue was raised after the 60-day deadline for appeals set forth in 44 C.F.R. §206.206(c)(1). Consequently, this appeal is denied. Even if the unit-price issue had been raised in a timely fashion I would have determined that the requested unit price of $19.18 per CY was unreasonable and that the approved $10 per CY is a reasonable unit price. The enclosed Appeal Analysis explains the basis for this determination.
Please inform the applicant of my decision. My determination constitutes the final decision on this matter as set forth in 44 CFR §206.206.
Sincerely,
/S/
John R. D'Araujo Jr.
Assistant Director
Readiness, Response and Recovery Directorate
Enclosure
cc: Ron Castleman
Regional Director
FEMA Region VI
Appeal Analysis
Appeal Issues and Submission TimesThe initial appeal submitted by the City of Pine Bluff on May 4, 2001, concerned a different issue than payment rates for debris. The issue of that letter was a request to restore eligibility for 144,363 cubic yards (CY) of debris that had been found ineligible because it was believed to have been removed from private property. Private property debris pick-up was not authorized in this disaster. Subsequently, the Regional Director found that 117,544 CY of the questioned debris were eligible. It is our understanding that the City has agreed with that figure and the issue of the quantity of eligible debris is not part of this second appeal.
In a June 29, 2001, letter to the State, the City added another issue to their first appeal. That issue was a request to be reimbursed for the difference between the contracted rate of $19.18 per CY and the approved rate of $10 per CY for all eligible debris. The $10 per CY rate was determined to be reasonable by the Disaster Recovery Manager and was determined by reviewing the prices proposed by the 12 offerors and selecting the rate of the lowest proposal. In a letter of July 11, 2001, the Regional Director determined that the issue of the cubic yard rate was submitted beyond the 60-day deadline for appeals and accordingly denied that portion of the appeal. On September 5, 2001, the City initiated a second appeal of FEMA's refusal to accept the appeal for the cubic yard rate. A review of the facts in this case leads me to confirm that FEMAs refusal to accept the appeal for the cubic yard rate was correct, as the issue was raised after the 60-day deadline for appeals set forth in our regulations. See 44 C.F.R. §206.206(c)(1). As such, this appeal is denied. Nevertheless, I note that our formal consideration of the issue would not have affected the substantive outcome. For your information, please see the following discussion of the unit-price issue.
DISCUSSION Unit Price
The reduction in the cubic yard rate by FEMA was based on a determination that a change in the method of execution of work made the originally bid rates inappropriate for the work actually accomplished. On December 21 to 26, 2000, the City published a request for proposals for debris pickup and disposal within the City of Pine Bluff. The work was to consist of six elements that were to be priced per cubic yard of debris processed. The work elements were:
Element Unit
I. Pick up debris and haul to temporary site CY
II. Process at temporary site CY
III. Haul to disposal site within the City or CY
Haul to disposal site outside the City CY
IV. Stump removal and disposal (five different sizes of stump) EA
V. Fill dirt to fill stump holes CY
VI. Miscellaneous services. HR
David Mitchell Construction, Inc. (DMC) was chosen by the City primarily because of its promise to employ local firms as subcontractors although its prices were not the lowest in all categories. DMC's price was the second lowest for just the first two elements ($4.43 vs $4.25), was substantially higher for the secondary haul element, and was very much lower for stump removal and disposal. The total unit price in DMC's contract for handling debris was $19.18 per CY. This did not include any amounts for the last three elements in DMC's proposal.
Before the start of work, the City and DMC agreed to change the method of execution by eliminating the temporary staging sites and the reduction process. The remaining work consisted of picking debris up from public property and transporting it directly to a landfill outside the City. However, the price remained the same at $19.18 per CY. The claimed justification for the price staying the same was that DMC would substitute removal of dangerous hangers and removal of stumps for the eliminated staging and reduction process. DMC explained that this arrangement was beneficial to the City because stump removal would have been an extra cost item and could have resulted in a considerable expense to the City. They also said that the hanger removal would have been a large extra expense as a miscellaneous service to be paid at an hourly rate for equipment and labor. They claimed that hanger removal was not part of the base contract.
This justification is flawed on many counts. First, hanger removal (any limbs larger than 2" diameter) was, in fact, required by the contract in Article III Scope of Work on page 3. Second, the offer to remove stumps for free also has little value because it appears to be based on a misunderstanding of the eligibility of stump removal as an extra cost item. Stumps are only an extra cost item when an uprooted stump must be dug out and hauled away. Otherwise the tree is cut flush with the ground and added to the debris pile and there is no cost beyond that attributed to the volume of the stump. A statement by a Pine Bluff Project Supervisor, Mr. Jimmy O'Fallon, that there could be "over a million small diameter stumps in the City" greatly exaggerated the cost risk that the City claimed to be concerned about. Most of such stumps would not have been eligible for any extra payment.
The third flaw concerns the amount of hauling work required. The original price schedule contained two haul trips, one to the staging site(s) and one from the staging site(s) to final disposal. Overlooking for the moment the very high price quoted by DMC for the second trip ($12.75 vs $5.00 for the next higher bidder), the elimination of the staging sites and reduction process should have reduced the price for the final haul to zero. Mike Mitchell, President of DMC, stated in an affidavit "Our firm was still required to haul the debris approximately the same distance." This means that the price for the pickup and haul to the landfill should have been $5.00 per CY, $3.00 plus $2.00 tipping fee. After FEMA was informed of the change in the method of execution of the work, the City was told by FEMA that the reimbursement rate would be $5.00 per CY. After some meetings with FEMA, State Emergency Management, and the City concerning the changed method of execution and the method of proposal evaluation, the City was told by FEMA that the eligible reimbursement would be $10 per CY. This rate had been determined by reviewing the prices proposed by the 12 offerors and selecting the rate of the lowest proposal.
The "Common Rule" regulations, 44 CFR §13.22 and by reference OMB Circular A-87, Attachment A, paragraph C.1.a., require that eligible costs be necessary and reasonable for the performance of the work. The change in method of execution of work from that described in the solicitation, and thereby what was bid on, makes the $19.18 per CY an unreasonable unit price. The following analysis gives the basis for this determination. When considering how the unit price is to be applied to the volume of debris, it must be noted that the total unit price would not have been multiplied times the total volume of unprocessed debris. The pricing schedule in the solicitation for proposals clearly indicated that the debris was to be picked up and taken to a temporary site, reduced by grinding and then hauled to a landfill, either inside or outside the City. The price for pickup, initial haul, and grind, $4.43 per CY in the proposal of DMC, would be applied to the total volume and the remainder of the unit price, $14.75 per CY for final haul and tipping fee, would be applied to approximately one fourth of the total volume. Grinding normally reduces vegetative debris to one fourth of the original volume. The result of these two calculations is the same as a unit price of $8.12 per CY times the total volume of debris. Allowing for variations in the f City also has not provided an adequate explanation of how certain portions of the proposal (the secondary haul to the landfill) were not considered during the evaluation process and how and why the method of execution of work was changed without a corresponding change in price. If the unit price for the secondary haul had been included in the evaluation, the ranking of the bidders would have changed markedly. The change that was made would normally require a re-solicitation of bids for the new method of execution and price schedule.
CONCLUSION
The unit price of $19.18 per CY is determined not to be reasonable. The claimed substitution of work items does not justify keeping the unit price at $19.18 per CY. A unit price of $10 per CY is determined to be reasonable for the work performed.
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