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Second Appeal Analysis
PA ID# 000-UDSD1-00; Nishnabotna Valley Rural Electric Cooperative
PW ID# Multiple PWs; Rural Electric Cooperative, Procurement
From January 19 to 26, 2010, a severe ice storm with high winds damaged the Nishnabotna Valley Rural Electric Cooperative’s (Applicant) electric distribution system. FEMA prepared 11 project worksheets (PWs) for conductor replacement. The Applicant hired a contractor to trim trees and vegetation in the right-of-way for the conductor replacement work. Between December 10, 2013 and March 14, 2014, FEMA issued eleven determination memoranda to notify the Applicant that tree trimming is maintenance, and is therefore not eligible.
The Applicant contested FEMA’s denial of $191,629.27 in tree trimming costs through eleven first appeal letters. It argued that although tree trimming maintenance requirements outlined in its reliability plan were regularly followed, the tree trimming work on appeal was beyond routine maintenance, and would not have been required but for the conductor replacement work. The Applicant explained that the repair work required the use of a temporary extension arm to move the existing conductor several feet to one side of the right-of-way while installing the new conductor. The contractor performing the repair work also needed access for its aerial lift and hydraulic digger derrick trucks to pull the new conductor along the right-of-way. The Applicant asserted that these trucks needed room to work to avoid catching lift arms and line ropes in vegetation. It further noted that in some cases, new line sections and poles were not constructed in the same alignment in the right-of-way as previous line sections and required vegetation trimming.
The Iowa Homeland Security and Emergency Management Department (Grantee) forwarded the eleven first appeals to FEMA Region VII with its support. The Grantee noted that tree trimming for maintenance purposes is very different from tree trimming for construction purposes. The Applicant is required to maintain a cleared right of way in accordance with the Iowa Administrative Code and National Electric Safety Code as part of its inspection and maintenance plans. For construction purposes, the Iowa Electrical Safety Code references the Lineman’s and Cableman’s Handbook, which requires clearing 25 feet around each conductor for construction. In addition, RUS Bulletin 1728F-804 specifies a minimum of ten feet of clearing on each side of a conductor with a total of a 30 foot wide clearing for construction. This additional clearing is required to allow for the safety of construction crews and the ingress of equipment into the construction areas. The Grantee explained how extension arms required additional clearing as the conductor must be at least two feet from the person performing construction to meet Occupational Safety and Health Administration rules for working around energized lines. The Grantee argues that tree trimming is eligible since it was required for the overall construction.
On May 6, 2014, FEMA Region VII sent a Final Request for Information (RFI) stating that the Applicant had not shown how the tree clearing was a direct result of the disaster as required by Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.223(a)(1), or a code or standard meeting the criteria outlined in 44 C.F.R. § 206.226(d). The Final RFI requested several items, including right-of-way clearing contracts for the past ten years and documentation for trees that were removed or trimmed.
On June 3, 2014, the Applicant responded to the Final RFI, providing maintenance plans, maintenance contracts for tree trimming, tree trimming costs for the past ten years, and a detailed list of Global Positioning System (GPS) locations where tree trimming occurred. The Applicant reiterated that, under its normal maintenance procedures, trees are trimmed to allow for ten years growth as stated in its maintenance plan, but for construction trees are cleared to a minimum of 25 feet from the conductor to allow for safe construction practices and comply with the Lineman’s and Cableman’s Handbook and RUS Bulletin 1728F-804. The Applicant further explained that American National Standard Institute (ANSI) A300 standard practices describe the method for pruning trees to maximize the effect of the work without damaging the tree, which may require pruning greater than the clearances established by the National Electric Safety Code.
On October 8, 2014, the FEMA Region VII Regional Administrator (RA) denied the first appeal determining that the Applicant did not: (1) provide documentation to demonstrate that the tree trimming work was procured in accordance with regulatory requirements; (2) provide a contract for the tree trimming service; (3) identify tree trimming work in the PW’s scope of work; and (4) show where tree trimming occurred, or if it was required as a result of the disaster. Lacking the contract, the RA also noted that contractor invoices appeared to bill using a time and materials method without a ceiling price.
On December 10, 2014, the Applicant submitted a second appeal for $191,629.63 in tree trimming costs. The Applicant states that it wrote the contract using hourly rates because the scope of work was not established. Further, the Applicant asserts that after the contract was awarded, the Applicant’s engineer prepared staking sheets, which identified line sections to be cleared, the reason for the clearing, the location of the clearing, and the approximate amount of clearing to perform.
On January 8, 2015, the Grantee forwarded the second appeal to FEMA. The Grantee states that while the contract appears to be a time and materials contract, it more closely resembles a unit price contract by fixing a per hour rate for labor rates and equipment, but not fixing units. The Grantee argues that the contract did control costs and prevent abuse by the contractor since the Applicant’s engineer later determined the number of units and supervised the contractor’s work.
On July 11, 2016, FEMA issued a RFI for the Applicant’s contract with Asplundh Tree Expert Co. (Asplundh) for tree trimming services, bid solicitation documentation, Asplundh’s complete bid package, documentation showing positive efforts to utilize small, minority-owned, and/or women-owned businesses, a cost or price analysis, and any other procurement documentation that was not included in the administrative record. FEMA also requested the quantity of vegetative debris removed and associated load tickets. The Applicant responded on August 5, 2016, and stated that requests for proposals were sent out to a large area across several states and every attempt was made to solicit bids from qualified small, minority-owned, and/or women-owned businesses, but only four companies submitted bids. The Applicant also stated that the quantity of vegetative debris was not available since the contractor chipped and reduced all debris.
Result of Disaster
To be eligible for Public Assistance, an item of work must “be required as the result of the emergency or major disaster event.” “Generally, costs that can be directly tied to the performance of eligible work are eligible” for funding. In formulating the PWs, FEMA approved conductor replacement and determined that it was required as the result of the disaster event. The Applicant claimed that the trimming of trees and vegetation was necessary to complete the approved conductor replacement work, even though it was not mentioned in the PW scope of work. The Applicant explained that the trimming of trees and vegetation for construction was different from the trimming of trees and vegetation for maintenance, which the Applicant regularly performed. To support its claim, the Applicant provided industry handbooks that state all vegetation should be removed from the right-of-way to erect poles and string conductors and noted this practice aligns with Occupational Safety and Health Administration regulations that require tree trimming to maintain minimum safety distances between the crew and extension arms holding a live conductor. The Applicant also submitted documentation to support that the costs were directly tied to the performance of eligible work. FEMA finds that the Applicant has demonstrated that in this instance additional trimming, beyond normal maintenance, was necessary to clear vegetation for equipment access and crew safety to complete the eligible conductor replacement scope of work.
Federal Grant Procurement Requirements
Subgrantees must comply with a variety of grant administrative requirements to be eligible and receive Public Assistance. When securing a contract for federally-funded work, an applicant is required to comply with the procurement requirements set forth in 2 C.F.R. Part 215. Among other requirements, applicants must (1) use the appropriate type of procuring instruments for the particular procurement; (2) consider small business, minority-owned firms, and women’s business; (3) make pre-award and procurement documentation available to the awarding agency; (4) perform and document a cost or price analysis; and (5) include specific provisions in the contract.
It is the Applicant’s responsibility to ensure a contract is appropriate for the particular procurement and promotes the best interest of the Public Assistance project. A time and materials contract establishes hourly rates for labor and equipment that will be used to perform specific tasks and pays the contractor for the actual cost of materials that are used during operations. FEMA’s PA Guide and Debris Management Guide state that applicants should avoid using time and materials contracts and that they should only be used for a limited time for work that is necessary immediately after a disaster and when the scope of work necessary to achieve an outcome is unknown. Generally, FEMA only permits time and materials contracts for work completed within the first 70 hours immediately following a disaster. The contract must also include a “not to exceed” provision.
The contract in this instance lists hourly rates for labor, equipment, and fuel, does not have a clear scope of work, and therefore meets FEMA’s definition of a time and materials contract. The Applicant’s contract was also signed on January 4, 2011, while the disaster occurred in January 2010—a year earlier. The Applicant should have been able to develop a well-defined scope of work within twelve months of the disaster. The Applicant has not demonstrated that a time and materials contract was appropriate for the particular procurement or demonstrated that the contract was only used for a limited time for work that was necessary immediately after a disaster. Furthermore, the contract does not include a not to exceed provision.
An applicant must also demonstrate that it took positive efforts to utilize small businesses, minority-owned firms, and women’s business enterprises whenever possible. While the Applicant states that “every attempt was made to solicit bids from qualified small, minority-owned, and/or women-owned businesses” as required by 2 C.F.R. § 215.44(b)(2), no explanation or documentation of those efforts was submitted. Furthermore, the Applicant has not provided documentation that it undertook the other positive efforts described at 2 C.F.R. § 215.44(b).
When an applicant procures services with federal funds, it must include certain federally prescribed provisions within the contract. Some of the provisions are based on sound contracting principles and others are required by Federal law, executive order, or regulation. The failure to include the required contract provisions is one of the most common findings under OIG audits of institutions of higher education, hospitals, and other private nonprofit organizations. In this case, the contract does not include certain required provisions.
Applicants must make pre-award and procurement documentation available to the awarding agency when the information is requested. FEMA sent the Applicant an RFI requesting bid solicitation documentation and all procurement or contract documentation that was not already included in the Administrative Record. In response, the Applicant mentioned that it sent out requests for proposals, but did not provide any bid solicitation documentation such as requests for proposals, invitations for bids, or cost estimates.
Additionally, some form of cost or price analysis must be made and documented in connection with every procurement action. The Applicant stated that it based the award on the winning bidder’s hourly rates, but did not demonstrate its completion of a cost or price analysis as required by Federal regulation.
Where an applicant materially fails to comply with any term of the award, including procurement requirements, FEMA may, as appropriate in the circumstances, take a number of actions including wholly or partially deobligate funding. On a case by case basis, FEMA may separately evaluate and reimburse costs it finds fair and reasonable. “A cost is reasonable if, in its nature or 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 costs.” Reasonable costs can be established through: the use of historical documentation for similar work; average costs for similar work in the area; published unit costs from national cost estimating databases; and FEMA cost codes, equipment rates, and engineering and design services curves. In previous instances, FEMA has partially deobligated the award to only reimburse reasonable costs when they could be determined. In its Final RFI, FEMA requested the quantity of vegetative debris removed and associated load tickets. In response, the Applicant stated that the quantity of vegetative debris removed was not calculated. Without the quantity of debris removed, FEMA is not able to determine if the costs incurred were fair and reasonable. Therefore, even if deemed appropriate as an enforcement action, reasonable costs cannot be awarded for this work.
While tree trimming may be required in furtherance of conductor replacement work, the Applicant did not follow the Federal procurement standards prescribed in 2 C.F.R. Part 215 in contracting for those services. Specifically, the Applicant did not use a suitable contract type with required contract provisions, provide procurement documentation, perform a cost or price analysis, and demonstrate efforts to utilize small businesses, minority-owned firms, and women’s business enterprises. When an applicant fails to comply with procurement regulations, FEMA has the authority to take an enforcement action, which can include awarding reasonable costs. However, without the quantity of debris removed, FEMA could not determine if costs incurred were fair and reasonable, should it consider this discretionary enforcement option appropriate. As such, the Applicant’s appeal is denied.
 Project Worksheets 293, 294, 299, 300, 301, 303, 309, 312, 313, 319, and 422.
 Thomas M. Shoemaker & James E. Mack, The Lineman’s and Cableman’s Handbook 12th Edition, 741 (2012) (FEMA was not able to obtain the 11th edition, which was in place at the time the disaster occurred.).
 The Applicant did not specify the monetary figure in dispute so the amount was calculated based on the first appeal submissions and corrected to reflect that PW 301 contained $19,356.82 in tree trimming costs instead of $19,356.46.
 Title 44 Code of Federal Regulations (44 C.F.R.) § 206.223(a)(1) (2010).
 Public Assistance Guide, FEMA 322, at 40 (June 2007) [hereinafter PA Guide].
 Letter from CEO/Manager, Nishnabotna Valley Rural Electric Cooperative, to Iowa Homeland Security and Emergency Mgmt. Dep’t, 1 (Dec. 26, 2013).
 Letter from CEO/Gen. Manager, Nishnabotna Valley Rural Electric Cooperative, to Recovery Div. Dir., FEMA Region VII, 2 (June 3, 2014); Reliability Plan, at 6, (May 22, 2003); Reliability Report, at 3 (2003); Reliability Report, at 3 (2004); Reliability Report, at 3 (2005); Reliability Report, at 3 (2006); Reliability Report, at 3 (2007); Reliability Report, at 3 (2008); Reliability Report, at 3 (2009); Reliability Report, at 3 (2010); Reliability Report, at 3 (2011); Reliability Report, at 3 (2012) Reliability Report, at 3 (2013).
 Thomas M. Shoemaker & James E. Mack, The Lineman’s and Cableman’s Handbook 12th Edition, 741 (2012); United States Department of Agriculture, RUS Bulletin 1728f-804, Section M (Apr. 1, 2005).
 29 C.F.R. § 1910.269(l)(2).
 The Applicant provided staking sheets, invoices, GPS locations, pole numbers, and the approximate length of right-of-way cleared at each location, correlated to line sections, invoices, and FEMA PWs
 See FEMA Second Appeal Analysis, Clarke Electric Cooperative, FEMA-1737-DR-IA, at 1 (Jan. 15, 2013) (finding tree trimming work to be an eligible cost when replacing conductors).
 Being a private nonprofit, the Applicant must comply with the Federal procurement requirements found at 2 C.F.R. Part 215 (for institutions of higher education, hospitals, and other private nonprofit organizations). Although FEMA Region VII applied the requirements found at 44 C.F.R. § 13.36 (for States, local, and Indian tribal governments) in adjudicating the first appeal, this error is inconsequential because the Applicant failed to comply with similar procurement requirements in 2 C.F.R. Part 215.
 2 C.F.R. § 215.44(b).
 PA Guide, at 53; Public Assistance Debris Management Guide, FEMA-325, at 99-100 (July 2007) [hereinafter PA Debris Management Guide].
 PA Guide, at 53; DHS Office of Inspector General, Report No. DA-13-20, FEMA Should Recover $3.8 Million of Public Assistance Grant Funds Awarded to Kenergy Corporation, Henderson, Kentucky (Jun. 18, 2013).
 PA Debris Management Guide, at 99-100.
 Contract between Nishnabotna Valley Rural Electric Cooperative and Asplundh Tree Expert Company, Rural Electric Cooperative Standard Terms and Conditions Contract for services or labor provided to Nishnabotna Valley Rural Electric Cooperative (Jan. 4, 2011).
 2 C.F.R. § 215.44(b) (requiring applicants to: (1) use small, businesses, minority-owned firms and women’s businesses to the fullest extent practicable; (2) make information on forthcoming opportunities available and arrange time frames for contracts such that they encourage small business, minority-owned firm and women’s business participation feasible; (3) consider whether larger contractors intend to subcontract with small businesses, minority-owned firms and women’s businesses; (4) encourage contracting with consortiums of small businesses, minority-owned firms and women’s businesses when a contract is too large for one of these firms to handle individually; and (5) use services and assistance provided by the Small Business Administration and the Department of Commerce’s Minority Business Development Agency, if necessary).
 Letter from CEO/Gen. Manager, Nishnabotna Valley Rural Electric Cooperative, to Iowa Homeland Security and Emergency Mgmt. Dep’t, at 1 (Aug. 5, 2016).
 See, e.g., The required contract provisions must: (1) provide for contractual remedies (2 C.F.R. § 215.48(a)); (2) allow for termination for cause and convenience (id. § 215.48(b)); (3) allow government access to records (id. § 215.48(d)); and (4) require compliance with Executive Order 11246, the Copeland Anti-Kickback Act, the Davis-Bacon Act, the Contract Work Hours and Safety Standards Act, the Bayh-Dole Act, the Clean Air Act and Clean Water Act, and the Byrd Anti-Lobbying Amendment (2 C.F.R. § 215 (Appendix A, ¶¶ 1-7)). In addition, there is a prohibition against entering into certain contract awards with parties listed on the government-wide Excluded Parties List System; therefore, applicants should include a clause verifying that contractors are not excluded or disqualified pursuant to 2 C.F.R. pt. 180 (2 C.F.R. pt. 215 (Appendix A, ¶ 8)).
 See DHS Office of Inspector General, Report No. DD-13-14, FEMA Should Recover $7.5 Million of the
$43.2 Million Public Assistance Grant Awarded to Craighead Electric Cooperative Corporation, Arkansas (Sep. 20,
2013); DHS Office of Inspector General, Report No. DD-13-08, FEMA Should Disallow $4.1 Million of the $48.5Million Public Assistance Grant Awarded to ARK Valley Electric Cooperative, Kansas (Apr. 16, 2013); DHS Office of Inspector General, Report No. DD-12-15, FEMA Public Assistance Grant Funds Awarded to Ochsner Clinic Foundation, New Orleans, Louisiana (Jun. 20, 2012).
 Contractual remedies (2 C.F.R. § 215.48(a)); Termination for cause and convenience (id. § 215.48(b)); (3) government access to records (id. § 215.48(d)); Contract Work Hours and Safety Standards Act (2 C.F.R. § 215 (Appendix A, ¶ 4)); Clean Air Act and Clean Water Act (id. ¶ 6); and Byrd Anti-Lobbying Amendment (id. ¶ 7).
 2 C.F.R. § 215.44(e).
 Email from Appeals Analyst, FEMA Public Assistance Appeals and Audits Branch, to CEO/Gen. Manager, Nishnabotna Valley Rural Electric Cooperative, at 1 (July 11, 2016, 1228 EST).
 Office of Mgmt. & Budget, Exec. Office of the President, OMB Circular A-122, Cost Principles for Non-Profit Organizations, Attachment A, Section (A)(3) (2004) (codified at 2 C.F.R. § 215).
 See FEMA Second Appeal Analysis, Bluebonnet Electric Cooperative, Inc., FEMA-4029-DR-TX, at 3 (May 20, 2014); FEMA Second Appeal Analysis, St. Mary’s Academy, FEMA-1603-DR-LA, at 5 (Aug. 04, 2015).
 Email from Program Specialist, FEMA, to CEO/Gen. Manager, Nishnabotna Valley Rural Electric Cooperative, at 1 (July 11, 2016, 1328 EST).
 Letter from CEO/Gen. Manager, Nishnabotna Valley Rural Electric Cooperative, to Iowa Homeland Security and Emergency Mgmt. Dep’t., at 2 (Aug. 5, 2016).