Environmental Compliance - Procurement

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	FEMA-1981
Applicant	Dickey County
Appeal Type	Second
PA ID#	021-99021-00
PW ID#	(PW) 1919
Date Signed	2017-12-19T00:00:00

Conclusion: Because the Applicant did not ensure a performance bond was in place, and because the Applicant’s contractor obtained material from a site not approved by the State Historic Preservation Office, the Acting Regional Administrator acted within her discretion to deobligate funding from PW 1919. 

 

Summary Paragraph

From February 14 through July 20, 2011, the state of North Dakota, including Dickey County (Applicant), experienced significant flooding.  FEMA subsequently prepared Project Worksheet (PW) 1919 to address damage to a certain length of road, including a grade raise as a hazard mitigation project.  At closeout, FEMA determined that the Applicant did not ensure that its contractor had a performance bond in place.  Additionally, the contractor had obtained material from a site not approved by the State Historic Preservation Office (SHPO).  For these reasons, FEMA deobligated all funding in PW 1919.  The Applicant filed a first appeal, arguing it had followed FEMA’s guidelines and was not responsible for its contractor’s mistake.  FEMA denied the first appeal for the same reasons it previously deobligated funding.  The Applicant has now filed a second appeal, acknowledging that it inadvertently neglected to ensure that the performance bond was in place, but arguing that it had no control over where its contractor obtained material.
 

Authorities and Second Appeals

• Stafford Act § 406.

• NHPA § 106.

• 44 C.F.R. §§ 13.36, 13.43.

• 36 C.F.R. § 800.

• PA Guide, at 127, 130-31. 

• Town of Rapidan, FEMA-1941-DR-MN, at 4.

• Stanley Cty., FEMA-1984-DR-SD, at 3‑4.

• Reclamation Dist. 800, FEMA-1628-DR-CA, at 5-6.

Headnotes

• Pursuant to 13 C.F.R. § 13.36, the Applicant must ensure a performance bond is in place.  

  • The Applicant’s failure to ensure a performance bond was in place did not comply with procurement requirements.

• The PA Guide, implementing NHPA § 106, requires that FEMA be able consider the effect of a project on historic sites prior to the beginning of work.

  • Because the Applicant’s contractor obtained material from a site that was not approved by SHPO, FEMA did not have this opportunity. 

• Pursuant to 13 C.F.R. § 13.43, when the material terms of the grant are not met, FEMA may deobligate funding.

  • Because terms related to procurement and historic preservation were not met, FEMA was authorized to deobligate funding.

 

 

Appeal Letter

Appeal Analysis

Background

From February 14 through July 20, 2011, the state of North Dakota, including Dickey County[1] (Applicant), experienced significant flooding.  As a result of the disaster, FEMA prepared project worksheet (PW) 1919 to address damage to a specified length of road.  The road also qualified for hazard mitigation to raise the grade of the road.  Relevant to this second appeal, PW 1919 advised that all materials used in the project needed to be obtained from sites certified by the State Historic Preservation Office (SHPO), and cautioned that if this was not done, federal funding would be jeopardized and funds could be deobligated.  FEMA obligated Version 0 of the PW in 2011 in the amount of $347,505.88. 

The Applicant and the North Dakota Department of Emergency Services (Grantee) requested closeout of PW 1919 in 2014 and submitted documentation for actual costs of $256,751.69.  During the closeout process, FEMA identified a lack of documentation as to whether a performance bond was in place with the contractor that performed the work.  Additionally, FEMA learned that material used in the project was sourced from outside the six sites that had been certified by the SHPO.  This occurred when the contractor moved outside one of the sites onto an adjacent property, apparently due to the difficulty in ascertaining property lines in the rural area.  There was a subsequent lawsuit by the landowner against the contractor, resulting in an award of damages.[2]  The Applicant was determined not to be liable.  FEMA consulted with the SHPO and determined that, if the contractor had sought certification for the location, the SHPO would have been required to perform a cultural survey due to the site’s proximity to a state historical landmark.

FEMA issued a determination memorandum on December 9, 2016, finding that the project was ineligible for funding due to the problems identified at closeout.  In conjunction, it prepared Version 1 of PW 1919, deobligating all previously awarded funding.

 

First Appeal

The Applicant appealed FEMA’s decision to deobligate all funding in a letter dated February 8, 2017.  The Applicant argued that it had followed all of the guidelines in place for the disaster and that the work in PW 1919 had been completed and fully inspected in accordance with the scope of work.  It acknowledged that its contractor had strayed over the line of the SHPO approved site, but noted that it had no culpability in the matter and argued that penalizing it was unfair and served no purpose.  It requested that, if some repayment needed to be made, that it be pro-rated to the portion of material that was harvested from the unapproved site.  The Grantee forwarded the Applicant’s appeal on February 10, 2017. 

The Acting Regional Administrator (RA) issued a final request for information (Final RFI) on May 17, stating that the Applicant was responsible for managing its contractors and that obtaining materials from outside the SHPO approved sites prevented FEMA from complying with its environmental and historical preservation (EHP) responsibilities.  FEMA requested documentation that all material was obtained “legally,” all environmental requirements were met, and a contract bond was in place prior to the beginning of construction.  The Applicant did not respond to the Final RFI.

On September 11, 2017, the Acting RA issued its first appeal decision, finding that the contractor obtaining material from a non-approved site prevented FEMA from conducting the necessary EHP review, and that the Applicant was responsible for the contractor’s mistake.  Pro-rating was not possible because of the inability to determine the relative quantity of materials obtained from the non-approved site.  FEMA also determined that the Applicant did not comply with procurement requirements by not having a performance bond in place prior to construction.  Accordingly, FEMA denied the first appeal.

 

Second Appeal

In its second appeal, dated October 11, 2017, the Applicant acknowledges that, due to the overwhelming number of projects under management, an honest mistake was made and the bond paperwork was not obtained from the contractor.  Regarding the EHP issue, it argues that, although it assisted the contractor in obtaining the SHPO’s approval for six sites, it had no control over the contractor and could not be held responsible for the contractor’s mistake.  Finally, it argues that requiring repayment of funds would be devastating and would serve no purpose because the Applicant did not mismanage the project or flagrantly ignore FEMA’s guidance.  The Grantee forwarded the second appeal in a letter dated October 12, 2017.

 

Discussion

Pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) § 406, FEMA may reimburse a state or local government for costs associated with the repair, restoration, reconstruction, or replacement of an eligible facility damaged or destroyed by a declared disaster.[3]  Stafford Act § 406 also grants FEMA the authority to fund hazard mitigation measures.[4] 

For a construction project, the Applicant must comply with certain minimum bonding requirements, which include a performance bond on the part of the contractor for 100 percent of the contract price to secure fulfillment of all of the contractor’s obligations under the contract.[5] 

FEMA must also comply with a range of federal statutes, regulations and Executive Orders related to EHP when providing PA funding.[6]  Pursuant to section 106 of the National Historic Preservation Act (NHPA), FEMA must consider the effects of proposed federally funded projects on historic properties prior to approving or expending grant assistance.[7]  At a minimum, FEMA must, in consultation with the SHPO, identify historic properties and evaluate the effects of a potential PA project on historic properties.[8]  When an applicant materially fails to comply with any term of an award, whether stated in a federal statute or regulation, state plan or application, notice of award, or elsewhere, FEMA may, among other remedies, disallow all or part of the cost of the activity or action.[9]  FEMA exercises this discretionary enforcement authority on a case-by-case basis to resolve issues of noncompliance.

Here, the Applicant acknowledges that it did not ensure that a performance bond was in place prior to construction.  This did not comply with federal procurement requirements.[10] 

It is also undisputed that the Applicant’s contractor obtained material from a location that had not been certified by the SHPO.  Because of this, FEMA was unable to consider the effects the work would have on any historic properties, as required by the NHPA.[11]  The fact that this was inadvertently done by the Applicant’s contractor does not change the requirement.[12]  Moreover, as noted above, the SHPO determined that a cultural survey would have been required if the contractor had sought approval.  The Applicant was aware of this requirement and was advised in the PW that federal funding would be jeopardized if material was obtained from an unapproved site.

 

Conclusion

The Applicant materially failed to comply with terms of the award and the Acting RA acted within her authority to deobligate funding from PW 1919.[13]  Accordingly, this second appeal is denied.

 

[1] According to the administrative record, the road in question was located in German Township and the Applicant has suggested that the Township may be responsible for repaying any deobligated amount.  Nevertheless, Dickey County was the Applicant and neither the state of North Dakota nor FEMA ever questioned its legal responsibility for the work described in PW 1919.

[2] The Applicant was a defendant in the lawsuit, but was dismissed upon a successful motion for summary judgment.

[3] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 406, 42 U.S.C. § 5172 (2006).

[4] Id. at § 406(e).

[5] Title 44 Code of Federal Regulations (44 C.F.R.) § 13.36(h) (2010).

[6] Public Assistance Guide, FEMA 322, at 127 (June 2007) [hereinafter PA Guide].

[7] National Historic Preservation Act of 1966 § 106, 16 U.S.C. § 470f (2000); 36 C.F.R. § 800.4.

[8] Second Appeal Analysis, Town of Rapidan, FEMA-1941-DR-MN, at 4 (Sep. 14, 2016); see also PA Guide at 127, 130-31.

[9] 44 C.F.R. §§ 13.43(a), (a)(2).

[10] Id. § 13.36(h).

[11] National Historic Preservation Act § 106.

[12] Cf. Second Appeal Analysis, Reclamation Dist. 800, FEMA-1628-DR-CA, at 5-6 (Mar. 15, 2016) (rejecting applicant’s argument that it should not be held responsible for the actions of its contractor).

[13] 44 C.F.R. § 13.43(a)(2).