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Second Appeal Analysis
PA ID# 000-UVB41-00; University of Houston-Main Campus
PW ID# 5800; Buildings, Scope of Work
On September 13, 2008, high winds and heavy rainfall from Hurricane Ike damaged the Athletic Center (Facility) on the main campus of the University of Houston (Applicant). Rain water entered the Facility and damaged interior fixtures, including 2,400 square feet (sq. ft.) of acoustic wall panels and 2,800 square yards of carpeting in two areas of the Facility.
FEMA prepared Project Worksheet (PW) 5800 to document eligible Category E (buildings/equipment) work to repair damages to the Facility, and obligated $198,995.00 in estimated project funding. This funding amount was lower than initially estimated. In a November 25, 2009 letter discussing this discrepancy, the Texas Division of Emergency Management (Grantee) informed the Applicant that FEMA would adjust funding for PW 5800 upon project completion, following an audit of the work and costs incurred.
On July 29, 2015, the Grantee notified FEMA of the completion of the project and a subsequent audit. The Grantee stated that its audit identified just $153,322.56 in eligible costs, resulting in a project underrun, in part due to ineligible work the Applicant performed in excess of the approved scope of work (SOW). The Grantee recommended deobligation of $45,672.44 in project funding. FEMA concurred with the Grantee’s audit findings, and prepared an amendment to PW 5800 that deobligated the underrun amount. FEMA acknowledged the Grantee’s audit in a letter dated October 20, 2015; the Grantee notified the Applicant of the cost underrun and the deobligation in a letter dated November 17, 2015.
The Applicant submitted its first appeal on December 18, 2015 for $60,982.18, and stated its actual costs resulted in a net project overrun. The amount on appeal included actual costs of $1,375.00 in Direct Administrative Costs (DAC), $1,216.18 in force account labor expenses, and $58,391.00 for items of contracted repair work. The latter amount included actual costs of $3,756.00 for repairs to an athletic field, $34,132.00 for the wall panels repair, $3,743.00 for repair of a baseball outfield fence associated with the Facility, and a $16,760.00 expense for work to replace rubber flooring in the Facility’s baseball locker rooms. Regarding appealed items of work, the Applicant argued: (1) the expense for the wall panels repair was an eligible cost overrun for approved work done under a contract procured from a fair and reputable source; and (2) the fence and rubber flooring repairs were additions to the approved SOW that were nonetheless eligible as damages directly resulting from the disaster.
On June 16, 2016, FEMA sent the Final Request for Information (RFI), notifying the Grantee that documentation for the project did not demonstrate the Applicant had completed the approved SOW. FEMA requested a detailed description of the work performed by each contractor hired by the Applicant, with a corresponding itemized cost listing, and, for each item of work not in the approved SOW, a narrative explaining why the Applicant did not request a SOW change. FEMA also asked for documentation demonstrating the work was required as a direct result of the disaster.
In its response to the Final RFI, the Applicant submitted a “revised claim” for PW 5800 that lowered the amount of the cost overrun. The Applicant provided documentation for each item of work not in the approved SOW, which included invoices, procurement documents, contract proposals, contracts, and payment information. Regarding the items of work pertinent to this appeal, the Applicant claimed the cost of the wall panel repairs was an overrun of $11,122.00 for previously approved work. Although the fence repair was an addition to the approved SOW, the Applicant also believed it would be reconciled at project closeout. The Applicant also claimed flooring repair costs totaling $4,265.00, which it stated was an overrun resulting from the difference between actual and estimated costs for all approved flooring repair work, including the rubber flooring.,
On December 7, 2016, the FEMA Region VI Regional Administrator (RA) partially granted the appeal and approved some funding. The RA found that items of work with costs totaling $32,841.18 were in excess of the approved SOW. The RA determined the Applicant failed to provide documentation demonstrating the work was required as a direct result of the disaster.
The Applicant submitted the second appeal on February 9, 2017, claiming costs for items of work totaling $19,130.00. The Applicant appeals part of the $32,841.18 found ineligible on first appeal, comprised of 3 items of work: (1) the wall panels repair ($11,122.00), which the Applicant states is an actual cost overrun of repairs approved in the SOW; (2) the fence repair ($3,743.00), which the Applicant states was an addition to the SOW it believed would be accounted for at project closeout; and (3) a cost overrun of $4,265.00 for flooring repairs approved in the SOW. In a February 16, 2017 transmittal letter, the Grantee expressed support for the Applicant’s appeal.
The Robert T. Stafford Disaster Relief and Emergency Assistance Act § 406 authorizes FEMA to provide funding to a State or local government for the repair, restoration, reconstruction, or replacement of a public facility damaged or destroyed by a major disaster. Per Title 44 of the Code of Federal Regulations (44 C.F.R.) § 13.30(d)(1), an applicant must obtain FEMA’s approval prior to revising the scope or objectives of the project. FEMA policy advises an applicant that it must notify the grantee as soon as a change of scope or need for additional funding is discovered. Moreover, an applicant should not assume that it can report scope change costs at the end of the project and FEMA will automatically fund the new costs.
The requirement to obtain approval for SOW revisions is relevant to determine the eligibility of all items of work raised on second appeal, as follows:
Wall Panel Repair
The Applicant claims an $11,122.00 actual cost overrun for work approved in the SOW to repair its acoustic wall panels. However, PW 5800’s SOW approves repairs for wall panels covering an area of 2,400 sq. ft. Documentation provided in the administrative record shows: (1) the Applicant completed repairs to 2,400 sq. ft. of wall panels for a total cost of $23,010.00; (2) FEMA approved $23,010.00 in funding for this repair work on first appeal; and (3) the Applicant incurred the cost of $11,122.00 (on second appeal) for work to repair a “test area” of wall paneling covering 600 sq. ft. The approved SOW did not include repairs to a “test area,” or any area beyond the 2,400 sq. ft. damaged area listed on PW 5800. Therefore, the work exceeded the approved SOW and is ineligible.
The damage description for PW 5800 did not list damages to the fence. Thus, the SOW did not approve any corresponding repair. The Applicant acknowledges the work was an addition to the approved SOW and justifies its claim by stating its belief that small-cost “scope overruns” would be reconciled at project closeout. It bases this understanding on guidance received from the Grantee in the November 2009 letter. However, the Grantee’s letter addressed reconciling differences in estimated and actual total project costs, not individual items of work. In the letter, the Grantee clearly recommended the Applicant “complete the project within the specified scope or work [sic].” The Grantee’s guidance with regard to project cost adjustments, from the November 2009 letter, does not apply to the fence repair. As the fence repair is an addition to what was approved in the SOW, it is ineligible.
Flooring Repair Items
The Applicant claims a $4,265.00 actual cost overrun for all flooring repair work approved in the SOW. However, the documentation provided by the Applicant with its response to the Final RFI attributes the cost to two distinct items of work: (1) a cost of $1,015.00 for flooring repair in a softball batting cage; and (2) a cost of $3,250.00 for carpeting in a first floor hallway. The SOW did not approve repairs to flooring in a softball batting cage, nor does FEMA’s Contract Summary Record list the contract number (11933) for this repair. Thus, the Applicant’s statement that this amount was a cost overrun for approved work is incorrect. Additionally, the document package provided with the response to the Final RFI shows that the Applicant incurred the actual cost for hallway carpeting repair under contract number W940216. Although carpeting replacement is listed on the approved SOW, first floor hallway carpeting is not specified, and contract number W940216 is not among those approved for flooring repairs (carpeting or otherwise) on the Contract Summary Record. Accordingly, the work is an addition to what was approved in the SOW and is ineligible.
There is nothing in the administrative record showing the Applicant requested approval from the Grantee or FEMA for the items of work on appeal, prior to completing them. The Applicant therefore chose to complete work that was not in the SOW, without the prior approval required by 44 C.F.R. § 13.30(d)(1). The items of work and their associated costs (totaling $19,130.00) are ineligible for Public Assistance (PA) funding.
All items of work on second appeal exceeded, or were additions to, the approved SOW, which the Applicant completed without the prior approval from FEMA required by 44 C.F.R. § 13.30(d)(1). Accordingly, the work remains ineligible and funding for it is denied.
 Project Worksheet 5800, University of Houston-Main Campus, Version 0 (Mar. 24, 2009).
 FEMA’s initial total cost estimate was $206,481.00; after revising the cost estimating worksheet, FEMA estimated $198,995.00 for the project.
 Letter from State Coordinating Officer, Tex. Div. of Emergency Mgmt. (TDEM), to Dir. of Envtl. Health and Risk Mgmt., Univ. of Houston, at 1 (Nov. 25, 2009) [hereinafter Grantee Closeout Guidance Letter] (responding to an earlier Applicant inquiry that was not included with the administrative record).
 Documents submitted with the response to the Final Request for Information (RFI) show that the Applicant drew an advance on project funding for PW 5800 on June 10, 2010, in the amount of $111,934.69 (equal to 75 percent of the approved Federal share for the project).
 The Applicant did not appeal any costs associated with the carpeting repair work; the only cost on first appeal associated with flooring repairs of any type was the rubber flooring repair work.
 Regarding the other items on first appeal, the Applicant argued: (1) the $3,756.00 cost for the athletic field repair was an actual cost underrun for work on the approved SOW; (2) its DAC expenses were an actual cost overrun for work on the approved SOW done under a contract procured from a skilled source the Applicant had used to recover from a previous disaster event; and (3) the force account labor expense was a reasonable cost for necessary work. Regarding the wall panels and DAC items on appeal, the Applicant also argued that under Stafford Act § 705(c), it should not be held liable for reimbursement if these items were later found ineligible.
 FEMA also requested records demonstrating the amount of funds drawn down by the Grantee, documentation showing specific DAC activities, and procurement and insurance documentation.
 Letter from Exec. Dir., Accounting Servs., Univ. of Houston, to CohnReznick Advisory Grp., TDEM, at 1 (June 27, 2016) (lowering its claim for the total project cost to $199,869.30, but not stating the revised dollar amount on appeal).
 Id. (stating “after notifying [the Grantee] about similar cost overruns on a different large project, [the Grantee] recommended that the overruns be pursued at closeout”).
 Id., at attachment “Cost Overrun – Carpet repairs for $4,265.” The Applicant’s “revised claim” for all contracted flooring repairs, submitted with the Final RFI response, differed substantially from the claim submitted with the initial first appeal submission, which was limited to only one item of flooring repair work (the rubber flooring).
 In response to the other items FEMA requested, the Applicant reiterated its arguments regarding contract procurements and protection under Stafford Act § 705(c), and submitted insurance documentation related to the Facility. The Grantee submitted documentation showing funding advances withdrawn in June 2010.
 FEMA First Appeal Analysis, University of Houston – Main Campus, FEMA-1791-DR-TX, at 4 (Dec. 7, 2016) [hereinafter FEMA First Appeal Analysis] (finding wall panel ($23,010.00) and athletic field repairs ($3,756.00) eligible for funding).
 This amount included the $11,122.00 claim for wall panels repair, the $3,743.00 claim for fence repair, the $16,670.00 claim for rubber flooring, and $1,216.18 in force account labor. The RA’s first appeal determination addresses the single $16,760.00 claim for rubber flooring, but does not address the claimed actual cost overrun of $4,265.00 for all flooring repairs (including the rubber flooring) that the Applicant submitted with its revised claim. This oversight is harmless, as the analysis of the rubber flooring applies to the eligibility of the additional flooring repairs. Such eligibility is readily discernable under the RA’s analysis of the rubber flooring repair, and when extrapolated to the additional flooring repairs leads to a conclusion that the additional flooring repairs are ineligible as unapproved additions to the SOW. Any potential oversight of the RA to itemize the additional flooring was simply a clerical error and is harmless.
 The RA also found the $1,375.00 DAC expense ineligible due to a lack of supporting documentation, and found the Applicant failed to satisfy all of the required conditions for protection under Stafford Act § 705(c).
 The Applicant submitted attachments to its second appeal letter, after the administrative record had closed. Some of the attachments may constitute new information submitted on second appeal. In the Final RFI, FEMA informed the Applicant that further documentation would not be considered following issuance of the first appeal decision. Per FEMA Recovery Directorate Manual, PA Program Appeal Procedures (Mar. 2016), the information submitted by the Applicant with the second appeal request cannot be considered in this analysis.
 Letter from Exec. Dir., Accounting Servs., Univ. of Houston, to CohnReznick Advisory Group, TDEM, at 1 (Feb. 9, 2017) [hereinafter Applicant Second Appeal] (claiming, for both the wall panels and flooring repair cost overruns, that the Grantee and FEMA failed to consider documentation supporting the work at project closeout).
 The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288 § 406, 42 U.S.C. § 5172 (2007).
 44 C.F.R. § 13.30(d)(1) (2007).
 Public Assistance Guide, FEMA 322, at 140 (June 2007).
 FEMA First Appeal Analysis, at 3.
 Letter from Exec. Dir., Accounting Servs., Univ. of Houston, to CohnReznick Advisory Grp., TDEM, at Attachment F (Dec. 18, 2015).
 Applicant Second Appeal, at 2.
 Grantee Closeout Guidance Letter, at 1.
 PW 5800, University of Houston-Main Campus (Version 0), at attachment (listing in the Contract Summary Record that five contracts are generally described as “flooring” repair contracts and Contract number W940216, the contract for hallway carpeting replacement with an associated cost of $3,250.00, is not listed).
 See FEMA Second Appeal Analysis, Lawrence County Engineer, FEMA-4002-DR-OH, at 6 (Sept. 26, 2016) (determining item(s) of work ineligible because the Applicant failed to obtain prior approval).