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Second Appeal Analysis
PA ID# 000-UXL4N-00; State of Louisiana Facility Planning & Control
PW ID# 1534; Legal Responsibility
On August 29, 2012, Hurricane Isaac struck the State of Louisiana. Prior to the disaster, the State of Louisiana Facility Planning and Control (Applicant) entered into a contract with a Construction Manager At-Risk (Skanska MAPP) (Construction Manager) for the construction and delivery of the new University Medical Center in New Orleans, Louisiana (Facility).
At the time of the disaster, construction was ongoing and the Facility had not been delivered to the Applicant. The Construction Manager directed its subcontractors to prepare the Facility for Hurricane Isaac, and after landfall, repair disaster-related damage to formwork and silt fencing. Additionally, subcontractors cleared and removed debris in the days following the disaster.
FEMA prepared Project Worksheet (PW) 1534 to document costs as well as the Construction Manager’s and subcontractors’ claims for lost income resulting from the disaster and certain operating costs. In sum, claimed costs totaled $762,270.27. FEMA obligated the PW for zero dollars, finding the project ineligible, but deferred determination of legal responsibility and lost income.
On November 30, 2013, the Applicant submitted a first appeal to the State of Louisiana’s Governor’s Office of Homeland Security and Emergency Preparedness (Grantee), asserting it had purchased an Owner Controlled Insurance Policy (OCIP), was responsible for losses prior to completion of construction, and the losses fell below the policy’s deductible amount. On February 10, 2014, the Grantee transmitted the Applicant’s appeal to the FEMA Region VI Regional Administrator (RA), requesting $762,270.27 in reimbursement.
The RA sent a Final Request for Information, asking the Applicant to demonstrate it had legal responsibility for the Facility and actively used it at the time of the disaster.
The Applicant provided documentation it previously provided and later submitted additional information following a meeting with FEMA Region VI.
On November 5, 2015, the RA denied the appeal. The RA found that the Applicant was not legally responsible for repair of the Facility and did not actively use it at the time of the disaster.
On January 4, 2016, the Applicant submitted its second appeal and made two arguments: (1) purchase of the OCIP made the Applicant legally responsible for property losses during the construction period; and (2) the Applicant’s intent to use the completed Facility satisfied the active use requirement. Within its transmittal of the second appeal to FEMA, the Grantee further argues that the Applicant is eligible because it is responsible for losses falling below the OCIP’s deductible.
Lost Income Claims
The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988 (Stafford Act) authorizes FEMA to provide federal assistance for the repair, restoration, or replacement of a facility damaged by a declared disaster
and assistance essential to meet immediate threats to life and property resulting from major disasters.
FEMA policy provides that loss of revenue is not an eligible cost authorized by the Stafford Act and is not eligible for PA funding.
The Construction Manager and its subcontractors assert their employees and equipment could not generate income because of the disaster and thus claim costs for salaries and various operating costs. These costs were not incurred to repair or replace a damaged facility, nor were they incurred to meet an immediate threat to life or property; additionally, they are lost revenue. For these reasons, they are not eligible.
Legal Responsibility for Facility Repairs
An eligible applicant must be legally responsible for the repair of a damaged facility at the time of the disaster.
Typically, a facility under construction is the responsibility of the contractor until the owner has accepted the work as complete.
Because a contractor is not an eligible applicant, the portion of the facility under the contractor’s responsibility is not eligible for funding.
Accordingly, in the event of damage to a facility under construction, FEMA must determine if an applicant is responsible for repairs before granting assistance.
Repairs are eligible if the contract under which the work is performed places responsibility for damage on the applicant during the construction period.
The contract under which the construction work was being performed, known as the Construction Manager Agreement (CMA), has a stated purpose “to secure the services of a Construction Manager to organize and direct the complete construction of the project and to assume all risks and responsibilities of producing the project within a guaranteed maximum price.”
Additionally, the CMA states that the Construction Manager must: 1) carry out the requirements of the CMA in order to organize and direct the complete construction of the project;
2) construct the project in compliance with the contract documents;
and 3) perform all work required to complete the project, defining work as the construction and services required by the contract.
Thus, the overall intent of these CMA provisions is to obligate the Construction Manager with the responsibility to complete the construction of the Facility and assume the risks and responsibilities of doing so. The language includes the Construction Manager’s direction of repair work to fulfill its legal responsibility of delivering a completed project to the Applicant. Accordingly, the repair work resulting from Hurricane Isaac is not eligible for funding because legal responsibility for the repair work rested with the Construction Manager, who is not an eligible applicant.
Purchase of OCIP
The Applicant argues its purchase of the OCIP created legal responsibility for the Facility. It also contends it is liable for the cost of the OCIP’s windstorm deductible, asserting this liability created legal responsibility. However, the CMA provides that should the Applicant choose to implement the OCIP, doing so will not limit or define the Construction Manager’s obligations under the CMA.
As such, the purchase of the OCIP did not change the Construction Manager’s legal responsibility for the repair work, as discussed in the prior subsection.
Further, the Grantee’s assertion that the Applicant was legally responsible for the OCIP deductible is without support as the CMA provides that the Construction Manager will bear this cost.
Accordingly, the Construction Manager, not the Applicant, had legal responsibility to pay the costs in question because they do not exceed the $1,000,000.00 deductible. Therefore, even had purchase of the OCIP given the Applicant legal responsibility for the Facility, the construction manager is contractually obligated to pay the costs in question in this appeal, which represents a duplication of benefits.
Work Eligibility for Debris Removal and Pre-disaster Site Preparation
To be eligible for PA funding, debris removal and emergency protective measure work must be the legal responsibility of the applicant at the time of the disaster.
Incorporated into the CMA is an additional contract document referred to as the American Institute of Architects A201.
It provides that the Construction Manager shall act in its discretion to prevent damage, injury or loss from emergencies affecting the safety of persons and property, as well as simultaneously act in its discretion to prevent damage, injury, or loss and incur costs for subcontractors to remove debris.
This provision makes the Construction Manager legally responsible to prevent damage, injury or loss from emergencies.
Based on this provision, the Construction Manager was legally responsible for completion of the pre-disaster site preparation and also post-disaster debris removal, as this work prevented injury and loss from the disaster, which was an emergency affecting the safety of persons and property. As legal responsibility for this work rested with the Construction Manager, who is not an eligible applicant, the work is not eligible for funding.
In response to the RA’s first appeal determination, the Applicant argues it actively used the facility. Legal responsibility, however, is the primary issue on appeal, thus a determination as to active use is not relevant to the eligibility determination made herein.
The Construction Manager, not the Applicant, had legal responsibility to perform emergency protective measures and repairs to the Facility. As such, the work is not eligible for funding as the Construction Manager is not an eligible applicant.
The terms and conditions of the agreement are expressed through a series of contract documents integrated together by a document entitled Construction Manager Agreement. Construction Manager Agreement between Applicant and Construction Manager, at 1.1 (Nov. 3, 2011) [hereinafter CMA
Project Worksheet 1534, State of La. Facility Planning and Control, Version 0, at 8 (May 16, 2013); Email from Disaster Assistance Employee, FEMA, to Rep., Governor’s Off. of Homeland Sec. Emergency Preparedness (Aug. 8, 2013 06:22 CEN).
The PW documented costs totaling $762,270.27. The Grantee’s transmittal letter references $762,720.00 in costs. However, the Grantee provided no argument or supporting documentation explaining a $449.73 increase in funding. This response references only the amount documented on the PW: $762,270.27.
Letter from Dir. Recovery Div., FEMA Region VI, to Dir., Governor’s Off. of Homeland Sec. Emergency Preparedness (July 3, 2014).
Letter from Dep. Dir., Recovery, Governor’s Off. of Homeland Sec. and Emergency Preparedness, to Dir. Recovery Div., FEMA Region VI, at 1 (Mar. 27, 2015) [hereinafter Oral Presentation Follow-Up Letter
Letter from Reg’l Adm’r, FEMA, to Dir., Governor’s Off. Of Homeland Sec. & Emergency Preparedness and Assistant Dir., State of La., Facility Planning and Control (Nov. 5, 2015) (citing Title 44 Code of Federal Regulations (44 C.F.R. § 206.226(k)(2), which requires a facility be actively used, to support the determination regarding active use).
Letter from Governor’s Off. of Homeland Sec. & Emergency Preparedness, to Assistant Adm’r, FEMA, at Att. 2 (Jan. 29, 2016).
The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 406, 42 U.S.C. § 5172 (2007).
Stafford Act §§ 403, 407.
 Public Assistance Guide
, FEMA 322, at 54 (June 2007) [hereinafter PA Guide
 PA Guide
, at 23; 44 C.F.R. § 206.223(a)(3) (requiring that eligible work must be the legal responsibility of an eligible applicant).
.; 44 C.F.R. § 206.222 (2011) (listing eligible applicants as state and local governments, private non-profit organizations, and Indian tribes or authorized tribal organizations).
§§ 220.127.116.11, 18.4.
. See also
American Institute of Architects Document A201-2007, dated Oct. 27, 2011, § 18.104.22.168 (hereinafter AIA A201
) (noting the CMA takes priority and precedence over all other contract documents should inconsistent or incompatible provisions in the contract documents arise).
44 C.F.R. § 206.223(a)(3); PA Guide
, at 23, 30.
 AIA A201
§ 10.4. While the AIA A201 provided is marked “Draft,” the Applicant states through its March 27, 2015 letter that the October 27, 2011 AIA A201 details the general contract conditions. Oral Presentation Follow-Up Letter
, at 2. Furthermore, the CMA § 1.0.7 states that the AIA A201 is incorporated into the CMA by reference. CMA
§§ 22.214.171.124, 5.3.3. See also CMA
§ 4.1.1 (stating that these costs are incurred by the Construction Manager or on behalf of the Construction Manager).
 AIA A201
§ 10.4; CMA
§ 126.96.36.199. (recognizing applicability of the AIA provision and indicating subcontractors shall be reimbursed for taking action to prevent threatened damage, injury or loss in case of an emergency affecting the safety of persons and property).