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Second Appeal Brief
PA ID# 000-UXYVD-00; Twin Valley Electric Cooperative, Inc.
PW ID# 1236; Reasonable Costs, Legal Responsibility
Conclusion: The Applicant substantiated the reasonableness of its actual costs for the reconductoring project, pursuant to OMB Circular A-122 and FEMA guidance. As the Applicant has not demonstrated legal responsibility for the provision of water, ice, and personal equipment, those costs are not eligible.
In December 2007, an ice storm damaged the Applicant’s overhead electric distribution system facility. In PW 1236, FEMA authorized work to repair and reconductor multiple line segments, including upgrades, and obligated the estimate. At closeout, FEMA reduced the higher actual costs for reconductoring work using an average per pole cost from PW 1240 plus an allowance for drilling in rocky soil. FEMA disallowed costs claimed for other secondary items found to be ineligible, including costs for the provision of water, ice, and personal supplies to employees. The Applicant’s first appeal asserted that it incurred all of the costs to complete eligible work and that drilling in rock required special equipment and more time, which resulted in the higher actual costs. It provided soil data to show the prevalence of rock encountered when drilling in the majority of the project area. It also argued that the secondary items were eligible. The Regional Administrator (RA) acknowledged the eligibility of several items but upheld using FEMA’s per pole cost model as appropriate to establish the higher costs as unreasonable. The partial approval increased funding by $1,073,585.88. The RA denied costs for providing water, ice, and personal equipment, stating that the Applicant failed to substantiate its legal responsibility to do so. On second appeal, the Applicant argues that the average cost calculated by the RA was not applicable, as costs above the average were necessary to drill in rock, which took longer and required a specialized drilling apparatus. It claimed it was unfair to base reasonable costs using a single PW that could not account for the difficulties caused by rock for the scale of the project that lasted 3 years. The Applicant concedes no written obligation existed for the provisioning of ice, water, or personal equipment, but argues the costs are eligible as necessary expenses of the work.
Authorities and Second Appeals
- 44 C.F.R. §206.223(a)(3).
- OMB Circular A-122, Attachment A §§ A(2)(a), (g), A(3)(a)-(d).
- PA Guide, at 40-41.
- OMB Circular A-122, Attachment A § A(3) provides that 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 costs. Other factors affecting costs must be considered when testing for reasonableness. Per the PA Guide, FEMA can establish reasonable costs using average costs for similar work.
- The Applicant demonstrated that it incurred higher costs in order to complete the eligible scope of work in difficult terrain, documented actual costs appropriately, and acted prudently.
- The Applicant’s actual costs fall within the range allowed by FEMA for similar work in the same disaster.
- Pursuant to 44 C.F.R. § 206.223(a)(3), an applicant must be legally responsible for work for it to be eligible.
- The Applicant did not demonstrate legal responsibility for providing its employees with water, ice, and personal equipment.