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Second Appeal Analysis
PA ID# 033-0517F-00; School District of Escambia County
PW ID# Multiple; Debris Removal
As a result of Hurricane Ivan (FEMA-1551-DR-FL; September 16, 2004), the School District of Escambia County (Applicant) incurred costs for the removal of debris from school properties within its district. The Applicant awarded a lump sum contract for debris removal from these properties. The Applicant requested assistance from the Federal Emergency Management Agency (FEMA) to reimburse this cost.
FEMA prepared Project Worksheets (PWs) 632, 617, 615, 733, 960, 595, 601, 612, 774, 628, 611, 765, 767, 771, 974, 613, 976, 775, 609, 630, 606, 603, and 598 to fund debris removal at 25 schools within the school district. The contract awarded for this work included the collection, hauling and disposal of all debris. The Applicant incurred costs of $2.32 million at an average of $72 per cubic yard of debris removed. Upon review of the contract, FEMA determined the cost for the work performed was not reasonable. In March of 2005, FEMA obligated the PWs using a reasonable estimate for debris removal of $6.05 per cubic yard. FEMA also determined that the contractor did not dispose of the debris in accordance with the contract; the contractor only moved the debris to the right-of-way where the Escambia County disposed of it at no charge to the Applicant.
FEMA subsequently reconsidered its determination and obligated versions to 21 PWs to allow for an increase in the unit cost for the debris removal. FEMA obligated Version 1 of each PW using an estimate of $9.26 per cubic yard plus $150 per tree counted by FEMA and brought to the right-of-way. The total amount obligated for the 21 PWs $338,988.First Appeal
In a letter dated June 28, 2005, the Applicant appealed FEMAs determination that the actual costs incurred for debris removal were unreasonable. The Applicant requested additional funding based on actual costs averaging $72 per cubic yard. The Applicant asserted this price was reasonable based on the conditions that existed at the time.
In a letter dated April 27, 2006, FEMA partially granted the appeal and prepared 21 version 2 PWs that increased the allowable cost to $35.58 per cubic yard of debris. This rate was based on a review of historical contract costs for similar debris removal work and market conditions at the time the work was completed. FEMA obligated these PWs for an additional $774,719 on November 16, 2005. This increased the total amount obligated to $1,113,707.Second Appeal
On June 23, 2006, the Applicant submitted a second appeal of the 23 debris removal PWs referenced in this analysis. The Applicant reiterates its position that the actual costs for the debris removal addressed under the 21 PWs is reasonable in accordance with the Office of Management and Budget Circular A-87 (OMB A-87). The Applicant requests that FEMA approve an additional $1,067,615 in actual debris removal costs.
To justify its position, the Applicant refers to a contract awarded by the Escambia County Government four days after the hurricane. The Applicant asserts this contract establishes the market price for debris removal services at the time. The Applicant also references contracts awarded after Hurricanes Dennis and Katrina to justify its claim that $72 per cubic yard for Hurricane Ivan is reasonable. Lastly, the Applicant refutes FEMAs use of a contract awarded by Escambia County for debris removal from various parks throughout the county to determine market price for comparable goods and services as $35.58 per cubic yard. The Applicant asserts that the services and time period of the referenced contract are unrelated to the circumstances of the subject debris removal and cannot be used to form a basis for reasonable costs. DISCUSSION
OMB Circular A-87 C.2 states that 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. Further, OMB Circular A-87 outlines guidelines to be used when determining the reasonableness of a specific cost. FEMA must use these guidelines when evaluating the reasonableness of the costs incurred by an applicant. The Applicant states in its appeal that FEMA regulations and policies allow for reimbursement based on actual costs. However, FEMA funds a project based on actual cost if the cost is determined reasonable.
In response to the Applicants first appeal, FEMA determined that a unit price of $35.58 per cubic yard was reasonable based on an analysis of historical contract costs for similar debris removal work performed in the area after the 2004 Florida hurricanes. In its second appeal, the Applicant refutes the fact that FEMA based this amount on a contract awarded by Escambia County for work performed seven months after the disaster. The Applicant argues that this contract does not represent the established market price immediately after the disaster under emergency conditions. Notwithstanding this fact, FEMA performed a review of historical data and the Escambia County contract cost was found to be comparable to other contract costs for debris removal performed during the emergency period immediately following the disaster.
To support its position that $72 per cubic yard is a reasonable cost for debris removal immediately following the disaster, the Applicant references a contract for debris and tree removal awarded by Escambia County four days after the hurricane. The Applicant asserts that this contract cost represents the established market price and should be considered in accordance with OMB Circular A-87. The referenced Escambia County contract costs include the cost of removal, hauling, and disposal of debris. OMB Circular A-87 states that market prices for comparable goods or services should be used to determine reasonableness of cost.
Finally, the Applicant argues the Florida Governors mandate to open schools within two weeks following Hurricane Ivan affected the costs and should also be considered when evaluating the reasonableness of the contract costs.
The Applicant contracted through a competitively bid process to remove disaster-related debris from 25 schools. The work included picking up scattered construction and vegetative debris, trimming trees, removing trees, stumps and hangers, grinding vegetative debris and placing all debris on public rights-of-way for final disposal by the county. Quantities of debris removed ranged from 382 to over 5,000 cubic yards per site. The Applicant is correct when stating the cost per cubic yard is not a good measure of reasonableness for the debris removal activities performed at the schools. Adequate competition in the market place is a better indicator of reasonable cost for the types of activities that were performed. While the Applicants costs appear to be unreasonable when expressed on a cubic yard basis, the Applicant has submitted sufficient justification demonstrating that the costs were reasonable for the immediate post-disaster environment.CONCLUSION
Based on the above, the costs the Applicant incurred for removing debris from the 25 school sites within its district are reasonable. Accordingly, the appeal is granted for $1,067,615.