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Second Appeal Letter
PA ID# 117-99117-00; Washington Parish
PW ID# Project Worksheet 3384; Leaners and Hangers
July 31, 2008
Col. Thomas Kirkpatrick (Ret.)
State Coordinating Officer
Governors Office of Homeland Security and Emergency Preparedness
415 North 15th Street
Baton Rouge, Louisiana 70802
Re: Second Appeal-Washington Parish, PAID 117-99117-00, Leaners and Hangers,
FEMA-1603-DR-LA, Project Worksheet (PW) 3384
Dear Col. Kirkpatrick:
This is in response to your letter dated December 18, 2007, which transmitted the referenced appeal on behalf of Washington Parish (Applicant). The Applicant appealed the Department of Homeland Securitys Federal Emergency Management Agencys (FEMA) decision to reduce the unit costs that the Applicant requested for the removal of dangerous leaning trees (leaners) and dangerous limbs (hangers). The amount in dispute is over $20 million.
Following the devastating effects of Hurricane Katrina, the Applicant contracted with IED of Foley, Alabama, to remove disaster-related debris from public and private property throughout the parish. The Applicant subsequently amended its contract with IED to include the removal of leaners and hangers. The Applicant requested reimbursement from FEMA based on its contracted unit prices for various debris removal activities, including the removal of leaners and hangers. FEMA prepared PW 3384 to document the scope of work and estimated costs of the debris removal activities. FEMA subsequently revised the PW because it determined that the unit costs for leaners and hangers were not reasonable. The Applicants requested unit costs for leaners ranged from $150 to $800 depending on the size of the tree. FEMA determined that unit costs of $145 to $435 per tree were reasonable. FEMA did not reduce the $800 cost for larger trees. The Applicant also requested $200 to $400 to remove each dangerous hanger, depending on size. FEMA determined that unit costs of $75 to $125 were reasonable. FEMA based its determinations of reasonable costs on a comparison of bids received by St. Bernard Parish.
On first appeal, the Regional Administrator determined that unit costs of $150 to $600 were reasonable for removal leaners. Although these unit costs were higher than those FEMA previously approved, they were still less than the Applicants contracted costs. The Regional Administrator also determined that reasonable costs for removing hangers should be based on a per-tree-unit-cost rather than on a per-limb-basis. He determined that a unit cost of $215 per tree was reasonable for hangers. This determination was based on a review of costs FEMA paid to other applicants. FEMA documented these cost in the Reasonable Cost Matrix.
The Applicant submitted its second appeal to your office on November 12, 2007, requesting that FEMA reinstate all previously disallowed costs. The Applicant based its request on the following:
(1) It acted prudently under the circumstances in procuring its debris removal contract; therefore, the costs are reasonable pursuant to OMB Circular A-87, Cost Principles for State and Local, and Indian Tribal Governments
(2) FEMA used a flawed methodology to develop the Reasonable Cost Matrix;
(3) FEMA should consider the reasonableness of the entire contract rather than individual line items; and
(4) FEMA reimbursed the United States Army Corps of Engineers (USACE) more to remove leaners and hangers than the amounts shown in the Reasonable Cost Matrix.
The Director of the Public Assistance Division met with representatives of the Applicant, its contractor, and your staff in Franklinton on April 17, 2008, to discuss the appeal. My staff subsequently requested additional information on April 23, 2008. The Applicant provided the requested information with a letter dated May 19, 2008. The information included affidavits from several participants in the debris removal operation, copies of its bid documents, contracts and task orders related to debris operations in other jurisdictions, project worksheets, and various other documents. We will respond to each point that the Applicant raised below.
The Applicant followed its procurement process and selected IED to perform various debris removal activities in accordance with published evaluation criteria. The original contract did not include line items for removing leaners and hangers. The Applicant subsequently amended the contract to include costs for removing leaners and hangers. The prices for these items of work were the same as those that IED charged the Town of Franklinton through a competitively bid process. In response to a second appeal from the Town of Franklinton, FEMA determined that the Towns use of acceptable procurement standards supports the determination that their contracted costs were reasonable.
The Applicants submitted information to support its claim that FEMA reimbursed some applicants at higher unit costs than those contained in the Reasonable Cost Matrix. For example, it presented information that purportedly shows that FEMA reimbursed the Louisiana Department of Transportation and Development (LDOTD) $215 to cut each hanger while the Reasonable Cost Matrix records a cost of $215 per tree. It also submitted information purportedly showing that FEMA reimbursed the City of Harahan more to remove leaners, hangers and stumps than the amounts contained in the Reasonable Cost Matrix.
The Applicant stated that FEMA should evaluate the reasonableness of the entire contract rather than individual line item unit costs. It submitted a comparison of the total cost of debris removal operations conducted by LDOTD using LDOTDs contract costs and IEDs costs. While the unit
costs for some items varied (for example, LDOTD paid $28 per cubic yard for debris removal while the Applicant paid $14 per cubic yard) the total costs differed by less than 1.5%. We have reviewed this information and determined that contractors use different strategies to prepare proposals for jobs.
Owners typically consider the total project cost, rather than individual line items, during their contract evaluation process. Therefore, we will evaluate the reasonableness of the entire contract, rather than individual line items, during the evaluation of this appeal.
The Applicant submitted a task order that USACE issued to one of its contractors in another parish that contained a unit cost of $215 per tree for leaners and hangers as well as unit costs for various pieces of equipment and labor categories. It also submitted an invoice purportedly from the contactor to USACE that showed the volumes of each line item billed for a specific period, but with the unit costs redacted. The Applicant stated that FEMA cannot say definitively that it reimbursed USACE only $215 per tree when the invoice shows that USACE paid its contractor a unit cost for leaners and for equipment and labor as well. The Applicant also submitted an affidavit from a USACE second tier subcontractor attesting that he received $50 per cut for each hanger and that he cut as many as 10 limbs on some trees, resulting in a cost of $500 per tree. Therefore, the Applicant concluded that $215 per tree for hangers is not reasonable. Further, it stated that FEMA has no basis for reimbursing the Applicant on a per-tree basis when it contracted for hangers on a per-limb basis. We have reviewed the information presented and determined that it is appropriate to evaluate the reasonableness of costs for leaners on a per-cut basis, rather than a per-tree basis.
We have met with the Applicant, reviewed all information it submitted with the appeal and have determined that the Applicants contracted costs for removing disaster-related debris is reasonable. Therefore, I am approving the appeal. By copy of this letter, I request that the Regional Administrator take appropriate act Mn on this matter pursuant to 44 CFR § 206.206.
Carlos J. Castillo
Disaster Assistance Directorate
cc William Peterson
FEMA Region VI
Louisiana Transitional Recovery Office