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Second Appeal Analysis
PA ID# n/a; Louisiana State University Health Care Services Division (LSU HCSD) Earl K. Long Medical Center, LSU HCSD Leonard J. Chabert Medical Center, LSU HCSD Medical Center of Louisiana at New Orleans, and LSU HCSD University Medical Center
PW ID# Multiple Project Worksheets ; Appeal Timeliness – Appeal Procedures – Direct Administrative Costs – Procurement
During the incident period of September 1 - 11, 2008, Hurricane Gustav caused damage throughout the State of Louisiana. Several state owned medical centers operated by the Louisiana State University Health Care Services Division (LSU HCSD / Applicants) were damaged and requested Public Assistance (PA) funding. Between June 9, 2009 and June 24, 2010, FEMA approved multiple Project Worksheets (PWs) after the Applicants completed 100 percent of the work. Beginning in 2015, the Louisiana Governor’s Office of Homeland Security and Emergency Preparedness (Grantee) conducted a closeout review and subsequently requested FEMA closeout the PWs. In response, FEMA closed out the projects between March 16, 2015 and August 31, 2016. In a February 21, 2017 letter, the Grantee submitted to FEMA a request to reopen seven PWs to allow for funding additional direct administrative costs (DAC). The Grantee stated that the additional DAC was not previously requested because the Applicants believed the DAC for all projects would be awarded in a single PW, as FEMA had done in prior disasters.
FEMA denied the request in an April 3, 2017 letter, noting that six of the seven PWs included DAC in their respective scope of work (SOW); as such, FEMA had already funded the DAC previously approved. FEMA observed that neither the Grantee nor the Applicants deducted DAC from the existing PWs in order to consolidate it all in a single PW, and stated that any additional DAC should have been included when the Grantee requested closeout. With regard to the seventh PW, FEMA found the Grantee should have likewise included the requested DAC in its closeout. The Grantee notified the Applicants of FEMA’s denial in an April 10, 2017 letter, which also advised the Applicants of their right to appeal FEMA’s determinations.
The Applicants appealed through letters dated June 12, 2017 requesting $21,233.00 in funding. The Applicants stated that FEMA’s April 2017 determinations served as the notification of the denial of its request for additional DAC (due to the DAC being ineligible pursuant to Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.206). The Applicants explained in their appeal that large projects are closed after a grantee determines all work has been completed, all documents have been received, and the costs for each large project have been reconciled and all payments have been made. Here, the Applicants contended the Grantee notified FEMA the projects were closed prior to substantiating all eligible funds were paid and all work was complete. The Applicants noted that FEMA’s policy on DAC changed subsequent to Hurricane Gustav.
The Applicants claimed that they received an email on April 11, 2015 from the Grantee that the projects had already been closed, and additional documentation was required to “complete [the] reconciliation, financial accounting, and closeout process.” The Applicants also stated that the Grantee and FEMA initiated closeout without allowing the Applicants to provide a complete accounting or all of the documentation associated with the project. Finally, the Applicants claimed that they had further documentation to support costs for the PWs but did not have ample time to submit the documentation to the Grantee prior to the PWs being closed. The Grantee submitted its concurrence in an August 10, 2017 letter. The Grantee noted that it coordinated with the Applicants in 2015 and 2016 to move all PWs to closeout, and following the completion of closeout, the Applicants internally reconciled grant administration and closeout related costs incurred for their closeout consultant.
FEMA sent the Applicants and Grantee a Final Request for Information (RFI) on December 14, 2017 and provided them with 30 days to respond. FEMA noted that the current administrative record was insufficient to support the Applicants’ appeals, and requested information to demonstrate: LSU HCSD had standing to file the appeals; the appeals were timely submitted; and that the claimed expenses constituted DAC. FEMA further noted that in determining whether the first appeals were timely submitted, it would consider the FEMA Second Appeal Analysis, St. Thomas University, which found that for a request to reopen a PW, the timing of the request to reopen did not govern whether an appeal was timely, but rather the substance of the dispute concerned. FEMA also asked for an explanation as to why the Applicants claimed they had insufficient time to conduct a complete accounting and reconcile all costs, since the projects were 100 percent complete when the PWs were written, and closeout occurred between five and seven years later. FEMA noted it would be considering in its decision a September 27, 2012 letter from the Grantee to all PA applicants, that stated that in all disasters declared on or after November 13, 2007, DAC would be written into each individual PW’s SOW. FEMA therefore asked for any additional guidance the Applicants may have received. Finally, FEMA requested a copy of the contract(s) giving rise to the DAC and documentation to demonstrate that the services were properly procured in accordance with federal law and standards.
The Grantee responded in a January 22, 2018 letter, and forwarded the Applicants’ January 10, 2018 response. The Applicants argued that they timely filed their first appeals and as support, included a January 12, 2016 email to the Grantee requesting the reopening of one of the seven PWs to include additional expenses, as well as their request to reopen the seven PWs in January 2017. The Applicants also submitted documentation to demonstrate that LSU HCSD had standing to submit appeals on behalf of the Applicants, in addition to accounting documents and LSU HCSD’s contract with its closeout consultant, CSRS, Inc.
The FEMA Region VI Regional Administrator (RA) denied the Applicants’ appeals in a June 27, 2018 letter. The RA found that the Applicants did not file their appeals within the regulatory timeframe. The RA made note that the Applicants acknowledged they were aware of FEMA’s closeout actions in 2015 and 2016, and therefore their June 12, 2017 appeals were untimely. The RA pointed to St. Thomas University to highlight that the request to reopen was treated as an appeal and likewise untimely since it was made more than 60 days after closeout.
Notwithstanding timeliness, the RA further determined that the costs claimed as DAC were actually indirect costs, as they did not relate to the project cost objectives, and there was insufficient documentation to demonstrate that the contract services were properly procured. The RA also distinguished between indirect costs and DAC. The RA detailed how the Applicants contracted with CSRS, Inc. in 2015 to assist with closing out multiple PA projects. The RA found that although the Applicants tried to argue the work was for specific PWs, the contract demonstrated the work was to review multiple projects for multiple disasters and the services were not specific to the PWs on appeal, which amounted to indirect costs. Finally, the RA determined that although FEMA requested procurement documentation in the RFI, the Applicants had not demonstrated that the contract with CSRS, Inc. was properly procured. Therefore, the RA denied the Applicants’ appeals.
The Applicants appealed the RA’s decision in an August 22, 2018 letter. The Applicants argue that despite multiple attempts to request guidance from FEMA and the Grantee on how to process claims for DAC following Hurricane Gustav, they received little to no guidance through the time when the PWs were closed out. Additionally, the Applicants note that the cost codes and process of billing done for DAC under Hurricanes Katrina/Rita should be acceptable for Hurricane Gustav. The Applicants also contend that their first appeals were timely and their DAC contract with CSRS, Inc. was properly procured. In addition, the Applicants state that FEMA did not make an eligibility determination on the fundamental issue regarding DAC since the Agency failed to provide guidance on how to submit it, and that through an RFI, FEMA failed to follow its own procedures. Accordingly, the Applicants request the PWs be reopened to allow the Applicants the opportunity to submit their DAC and resolve existing issues.
The Grantee transmitted the Applicants’ appeal to FEMA in an October 17, 2018 letter. The Grantee concurs with the Applicants and further claims that the confusion and delay in the Applicants submitting their DAC was due to inaction and confusing guidance promulgated by FEMA. The Grantee also argues that the Applicants procured the services of CSRS, Inc. out of public necessity and as a result of the confusion created over calculating and defining DAC and the tight time constraints that existed to submit the costs once the Applicants became aware they could not request the DAC in one roll-up PW. Therefore, the Grantee finds it was not feasible for the Applicants to follow normal contract procurement procedures because FEMA’s actions regarding DAC guidelines required the Applicants to take immediate action in securing the assistance of CSRS, Inc., and their procurement method should be justified under a public emergency/exigency or single source exception to the normal procedural requirements.
Section 423(a) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) provides that “any decision regarding eligibility for . . . assistance under this title may be appealed within 60 days after the date on which the applicant for such assistance is notified of the award or denial of award of such assistance.” Implementing that provision, 44 C.F.R. § 206.206(c)(1) requires applicants to submit appeals within 60 days of receipt of the notice of the action that is being appealed. According to the FEMA Recovery Directorate Manual, Public Assistance Program Appeal Procedures (Appeals Manual), the date the applicant receives notice of the determination from the grantee serves as the date the applicant’s 60 day appeal timeframe begins to run, regardless of whether the applicant previously learned of the determination.
Here, though the Applicants acknowledge they were aware of the closeouts in 2015 and 2016, there is no documentation showing they were aware of the exact determinations or funding approved in the closeouts, nor that they were advised of their right to appeal the determinations prior to the April 10, 2017 letter. Furthermore, because the administrative record lacks documentation verifying the Applicants’ receipt date of the Grantee’s April 10, 2017 letter, FEMA finds that the Applicants timely filed their first appeals. This is in line with the rationale used in FEMA Second Appeal Analysis, St. Thomas University, which found that a letter, which advised an applicant of FEMA’s closeout determination and its right to appeal, was the mechanism that triggered the 60-day appeal timeframe.
An appeal must contain documented justification supporting the applicant’s position and stating the provisions in Federal law, regulation, or policy with which the appellant believes the initial action was inconsistent. The burden to substantiate appeals with “documented justification” falls to the applicant and hinges upon the applicant’s ability to produce not only its own records, but to clearly explain how those records support the appeal.
When an RA is considering denying a first appeal in whole or in part, he or she issues a Final RFI to the applicant noting all information in the administrative record the Region is considering in deciding the appeal, and requesting the applicant provide any additional information to support the appeal. In addition, Version 4 of the Appeals Manual states that when reviewing and analyzing a first appeal, if FEMA identifies a new eligibility issue, it issues a Basic RFI. For purposes of the new eligibility issue, the RFI essentially serves as a PA eligibility determination. Accordingly, it informs the applicant that a new eligibility issue was identified, frames the new issue and informs the applicant that it has 60 days from receipt to respond. Following receipt of the applicant’s response to the RFI or expiration of the 60 day timeframe, the first appeal proceeds and is adjudicated on both the original and new eligibility issues.
In this instance, the RA informed the Applicants in the Final RFI that the current administrative record was insufficient to support the Applicants’ appeal, and then further stated the reasons for the potential denial. The RA therefore requested documentation to demonstrate the Applicants properly procured its contract for the claimed DAC, and that the DAC were eligible. For instance, the RA notified the Applicants that the administrative record was lacking documentation explaining the circumstances that prevented the Applicants’ accounting and reconciliation of the costs for the subject PWs prior to closeout. The Applicants then responded to the Final RFI with additional supporting documentation.
Although FEMA informed the Applicants that new eligibility issues concerning the DAC were identified, framed the new issues, and provided the Applicants time to respond, the Applicants argue that FEMA failed to follow its own procedures. In their second appeal letter, the Applicants cite to FEMA’s RFI procedures generally but do not articulate, with specificity, any alleged error in the RFI process that prejudiced their appeal. Furthermore, the Applicants do not specify the provision of law or policy they believe the Final RFI was inconsistent with. For all these reasons, the Applicants’ request that FEMA issue a new RFI is denied.
Direct Administrative Costs
FEMA will reimburse DAC incurred by applicants that are properly documented and can be tracked, charged, and accounted for directly to a specific project. Such costs must be reasonable for the work performed and accounted for in accordance with applicable federal regulations. Costs that are not tracked to a specific project, but are instead indirect costs, are not DAC and may be reimbursed as management expenses.
The RA notified the Applicants in an RFI that the administrative record was lacking documentation explaining the circumstances that prevented the Applicants’ accounting and reconciliation of the costs for the subject PWs prior to closeout. The Applicants state they only learned that they had to individually claim DAC separately in each PW in 2015. However, as FEMA noted previously in the RFI, the Grantee informed all PA applicants in 2012 of the DAC policy for Hurricane Gustav projects, specifically, that in all disasters declared on or after November 13, 2007, DAC would be written into each individual PW’s SOW. Therefore, as the closeout process for the PWs began in 2015, three years after the Grantee’s 2012 notice, the Applicants had time to understand the process for submitting DAC. As the RA noted in the first appeal decision, the documentation submitted by the Applicants shows work was completed by CRCS, Inc. to closeout multiple projects for multiple disasters. Since all substantive work was completed by the Applicants several years prior to engaging CRCS, Inc., all of the costs submitted to closeout these PWs were incurred after FEMA and the Grantee initiated the closeout process and therefore were unnecessary and unreasonable. Furthermore, the Applicants cited to a request in January 2016 for FEMA to reopen one of the PWs, which the Agency did, and FEMA awarded the funding requested. This demonstrates both the Applicants’ awareness of the closeout process and their ability to submit additional eligible costs during that time. Accordingly, as FEMA has determined the claimed DAC are ineligible for funding, FEMA denies the Applicants’ request to reopen the PWs.
Adherence to Federal procurement laws is required to receive grant assistance. All procurement transactions using Federal funds must also be conducted in a manner providing free and open competition to the maximum extent practicable. Moreover, 2 C.F.R. § 215.45 requires some form of cost or price analysis and documentation in the procurement files in connection with every procurement action—the implication being that the cost/price analysis is done at the time of procurement. In addition, an applicant must maintain records sufficient to detail that such cost or price analysis was made and documented in the procurement files in connection with the procurement action. These records will include, but are not limited to: rationale for the method of procurement; selection of contract type; contractor selection or rejection; and the basis for the contract price. In addressing non-compliance, FEMA may disallow all or part of the cost of the activity or action not in compliance.
The Applicants assert that the contract with CSRS, Inc. was properly procured. In contrast, the Grantee acknowledges the Applicants procured the services of CSRS, Inc. in a noncompetitive fashion, but argues the DAC are nonetheless eligible as the services were only available from a single source, or alternatively, the public exigency or emergency would not permit the delay that would have resulted from competitive solicitation. The administrative record does not contain documentation demonstrating the Applicants procured the services of CSRS, Inc. in a manner that allowed free and open competition. Specifically, the Applicants have not submitted any records or evidence showing what their procurement policies were or that any price or cost analysis was performed prior to selecting CSRS, Inc. Moreover, nothing has been submitted to demonstrate the Applicants’ rationale for the method of procurement; selection of contract type; contractor selection or rejection; or the basis for the contract price. In addition, the Applicants have not provided documentation establishing the closeout services, which serve as the basis for the requested DAC, were only available from CSRS, Inc.
As noted previously, the Applicants completed the SOW on the projects five to seven years before closeout, and were informed how DAC would be treated in relation to Hurricane Gustav in 2012, therefore providing the Applicants ample time to solicit bids and select a contractor. Even if this situation arguably constituted an exigency to the Applicants to require immediate action, this exigency did not extend to the public. Therefore, the Applicants have not demonstrated a public exigency existed that prevented them from engaging in competitive solicitation. As the need to perform closeout services does not constitute a dangerous situation, FEMA finds the Applicants have not established a public emergency existed that would have permitted the noncompetitive procurement.
Additionally, FEMA issued Disaster Assistance Policy 9525.9, Section 324 Management Costs and Direct Administrative Costs, on November 13, 2007, which specifically addressed the process for obligation of DAC. This included specific reference to obligation of DAC for subrecipients on individual PWs. While exceptional provisions were made to authorize DAC for previously declared incidents in Louisiana, namely Hurricanes Katrina and Rita, non-adherance to a published FEMA policy does not constitute a justification for emergency procurement procedures.
Since the Applicants have not demonstrated they were excused from complying with the requirement to engage in free and open competition, FEMA therefore finds the Applicants did not comply with federal procurement requirements.
The Applicants timely submitted their first appeals. However, the RA then followed FEMA procedure in notifying the Applicants that the first appeals may be denied based on the Applicants’ inability to substantiate that the DAC claimed were eligible and properly procured. The Applicants have not demonstrated that the costs submitted were eligible DAC or that the contract for the costs was properly procured. Therefore, the appeal is denied.
 There are four separate Applicants under Louisiana State University Health Care Services Division: Chabert Medical Center; Medical Center of LA New Orleans; Earl K. Long Medical Center; and University Medical Center. They each have their own PA ID, associated with the relevant PWs on appeal, but fall under the umbrella of LSU HCSD, which filed the appeals on their behalf and as such, throughout the first appeal, FEMA, the Applicants, and the Grantee referred to them as one “Applicant.” In this decision, they will be referred to as the “Applicants.”
 The seven PWs on appeal are: 2069, 2081, 2239, 2331, 2438, 2843, and 6202.
 Letter from Dep. CEO, La. State Univ. Health Center Serv. Div., to Dep. Dir. Disaster Recovery Div., La. Governor’s Office of Homeland Security and Preparedness, at 3 (June 12, 2017).
 FEMA Second Appeal Analysis, St. Thomas Univ., PW 6269, FEMA-1609-DR-FL, at 3 (June 8, 2017)
 The Applicants included attachments to the appeal, including emails regarding the status of closeouts, emails requesting the claimed DAC charged by CRCS, Inc. in late 2016, the original and extended contracts with CRSC, Inc., and a FEMA memorandum providing guidance on DAC from 2009.
 The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) of 1988 § 423(a), 42 U.S.C. § 5189a(a) (2006).
 Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.206(c)(1) (2007).
 Recovery Directorate Manual, Public Assistance Program Appeal Procedures, Version 3, at 11-12 (Apr. 7, 2014). This requirement remains unchanged in Version 4 of FEMA’s Recovery Directorate Manual, Public Assistance Program Appeal Procedures, which was in effect when FEMA transmitted its April 3, 2017 determinations.
 See St. Thomas Univ., FEMA-1609-DR-FL, PW 8956, at 3.
 44 C.F.R. § 206.206(a).
 FEMA Second Appeal Analysis, Chambers Cty., FEMA-1791-DR-TX, at 7 (May 26, 2017).
 FEMA Second Appeal Analysis, City of Sweetwater, FEMA-1345-DR-FL, at 3 (Aug. 15, 2017).
 Appeals Manual, Version 4, at 14.
 FEMA Second Appeal Analysis, Roman Catholic Bishop of Springfield, FEMA-1994-DR-FL, at 4 (Sept. 14, 2018).
 Appeals Manual, Version 4, at 15.
 FEMA Disaster Assistance Policy (DAP) 9525.9, Section 324 Management Costs and Direct Administrative Costs, at 2 (Mar. 12, 2008).
 Office of Mgmt. & Budget, Exec. Office of the President, OMB Circular A-110, Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations (1999) (codified at Title 2 of the Code of Federal Regulations (2 C.F.R.) § 215.5 (2008)). Although the Applicants’ procurement actions are governed by the requirements of 2 C.F.R. Pt. 215, FEMA’s procurement requirements in 44 C.F.R. § 13.36 for state and local governments contain similar provisions, including the requirements that all procurement actions be conducted in a manner providing full and open competition and that applicants perform a cost or price analysis in connection with every procurement action
 2 C.F.R. § 215.62; See FEMA Second Appeal Analysis, City of Nome, FEMA-4050-DR-AK, at 6 (Sept. 28, 2016) (determining that the Applicant did not comply with Federal procurement requirements; therefore, costs associated with contract work were not eligible for PA funding).
 Disaster Assistance Policy 9525.9, Section 324 Management Costs and Direct Administrative Costs, at 6 (Nov. 13, 2007).