Conclusion: The Applicant did not comply with federal procurement regulations for the contract associated with this grant. As such, FEMA Region IV was within its discretionary authority to award reasonable costs to remedy the procurement non-compliance.
During the incident period from September 13, 2004 to November 17, 2004 Hurricane Ivan destroyed modular classrooms owned by the Community Action Program Committee (Applicant), a private non-profit (PNP). The Applicant secured project management services from Reconstruction Management Corporation (RMC) to replace ten classroom units. FEMA prepared Project Worksheets (PW) 3741, 3743, 3744, 3746, 3768, 3769, 3770, 3773, 3775, and 3776 to document costs associated with the replacement of the ten modular classrooms. On December 5, 2014, FEMA stated that it would make adjustments to nine PWs to deobligate a total of $267,514.17 because the Applicant used a CPPC in non-compliance with 2 CFR § 215.44(c). The Applicant appealed FEMA’s determination arguing: (1) it chose to compensate RMC with a percentage of each PW written because compensating RMC by an hourly rate would have been too costly (2) cost overruns were justified and (3) 705(c) would bar FEMA from recovering funds associated with these PWs.
The FEMA Region IV Regional Administrator (RA) denied the first appeal and exercised her discretionary authority to award the original cost estimate and deobligate the cost overruns to remedy the procurement non-compliance. On second appeal, the Applicant requests $267,514.17 in cost overruns and reiterates its previous arguments. The Grantee also contends: excluding PNPs from protection under 705(c) is arbitrary agency action.
Authorities and Second Appeals
Administrative Procedures Act § 706(2)(A).
Stafford Act § 705(c).
2 C.F.R. §215.43, 215.44(c), 215.62, 230 Appendix A.
PA Guide, at 28-31, 34.
FP-205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures, at 1, 4-7.
Muschany v. United States, 324 U.S. 49, 61-62 (1944).
Chambers Cty., FEMA-1791-DR-TX, at 6 (May 26, 2017).
St. Mary’s Acad., FEMA-1603-DR-LA, at 2 (June 22, 2017).
Per 2 C.F.R. § 215.44(c), “the ‘cost plus a percentage of cost’ and ‘percentage of construction cost’ methods of contracting shall not be used.”
Per 2 C.F.R. § 215.62, when an applicant fails to comply with the terms and conditions of an award, FEMA may disallow all or part of the cost of the activity or action not in compliance.
Stafford Act, Section 705(c) applies to state, local, and tribal governments. It does not extend to PNPs.