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Second Appeal Analysis
PA ID# 000-UXHWC-00; University System of Georgia Board of Regents
PW ID# Project Worksheets 502 and 508; Debris Removal, Procurement
From October 4–15, 2016, Hurricane Matthew deposited large amounts of vegetative debris on six facilities owned by the University of Georgia, which is an institution governed and managed by the Board of Regents of the University System of Georgia (Applicant). The Applicant elected to participate in the Public Assistance Alternative Procedures Pilot for Debris Removal opting for an increased Federal cost share for accelerated completion of debris removal, reimbursement of straight-time force account labor, and retention of recycling income. In Project Worksheet (PW) 508, FEMA documented the Applicant’s claim of $449,914.70 in reimbursement for its first 30 days of debris removal work at an increased Federal cost share of 85 percent. FEMA also prepared PW 502 to address the Applicant’s claim of $302,326.70 for debris removal work performed in the following 60 days to be reimbursed at an 80 percent Federal cost share.
However, FEMA disallowed all costs claimed in PWs 502 and 508 due to the Applicant’s non-compliance with several conditions of its sub-grants. FEMA found that the Applicant did not satisfy the Public Assistance Program and Policy Guide’s, FP 104-009-2 (PAPPG) requirements to: (1) monitor its contracted debris removal operations, and (2) substantiate its claimed costs with documentation such as load tickets and monitoring logs noting the debris types, quantities, load capacity and number of loads, reduction methods, and pick up and disposal locations. In addition, FEMA explained that the Applicant did not comply with Federal procurement and contracting requirements because: (1) it selected the primary contractor based on experience and skills without considering price as a factor; (2) it procured its contracted services through time and materials (T&M) contracts without a cost ceiling and without establishing that no other contracts were suitable and the necessary oversight was provided to ensure efficient methods and effective cost controls; (3) the primary contractor’s additional 20% charge for overhead and profit (O&P) constitutes a prohibited cost-plus-percentage-of-costs (CPPC) fee; and (4) the costs might not be reasonable compared to the average and median debris removal costs for the disaster. Lastly, FEMA determined that the Applicant did not fully comply with environmental and historic preservation (EHP) requirements because some of the debris was left to rot at a disposal site located in a floodplain without obtaining the required permit from the Georgia Department of Natural Services (DNR).
On August 17, 2017, the Applicant appealed FEMA’s denial of all costs in PWs 508 and 502 with the exception of the costs FEMA deemed as ineligible CPPC fees. The Applicant argued that it fully complied with its own procurement requirements in selecting its debris removal contractor using a competitive qualification process, and elected to utilize a T&M contract to help manage and save costs. It also contended that it provided a high degree of oversight to ensure cost controls in a reasonable manner, and was able to determine that the costs were reasonable by monitoring the quality of the work completed. While it conceded that it did not use a third party contractor to monitor its contracted debris operations, the Applicant insisted that its personnel remained on site to monitor the work and the contractors’ load estimates were accurate. It also asserted that FEMA’s requirement to monitor debris quantities and amounts is an “interpretive variable,” which varies depending on the project and the personal opinion of the assessor. Lastly, the Applicant emphasized that it put forward its best effort to comply with all Public Assistance (PA) eligibility and grant requirements, but had difficulty getting assistance from FEMA staff in the documentation submission process due to confusion and disorganization that resulted from several FEMA personnel changes. The Georgia Emergency Management Agency (Grantee) transmitted the Applicant’s appeal to FEMA on September 1, 2017, explaining that it “fully understands that grant dollars must be spent in accordance with the law, [but] there should be some ability for judicious, logical evaluation of extensive supporting documentation to arrive at reasonable and defensible assistance to the [Applicant].”
FEMA issued the Final Request for Information (RFI) on December 21, 2017, requesting that the Applicant provide: (1) a copy of its own procurement procedures, (2) an explanation of the primary contractor’s unscheduled rates, (3) backup documentation for the contractor mobilization and travel fees, (4) its process for selecting the subcontractor, (5) justification for the subcontractor’s $110.00 hourly labor rate, (6) the final disposition of the debris staged in a floodplain, (7) support for the costs claimed for force account equipment use, (8) an explanation for the discrepancies in its claimed force account labor hours, wages, and benefit rates, (9) load tickets, records noting the number of loads and load capacities, and monitoring logs documenting the debris types, quantities, reduction methods, and pick up and disposal locations, (10) evidence that its costs were reasonable, and (11) justification for its use of T&M contracts.
In response, the Applicant argued that it saved costs through its use of T&M contracts, an informal verbal contract arrangement with its subcontractor charging a $110.00 hourly labor rate, and insurance industry software to determine unscheduled rates. It also explained that it did not keep activity logs for its force account equipment use because FEMA staff advised that reimbursement would be based on FEMA equipment rates. The Applicant insisted that its debris removal work was properly monitored by on-site personnel, and that it provided: (1) contractor invoices that described the number of trees cut and loads hauled, and (2) a debris summary sheet for each site with contractor information, debris estimates, GPS locations of the debris piles, and the final disposition. Furthermore, the Applicant stated that the quantities of storm-generated debris collected from two of the six facilities could be ascertained in contractor invoices and load tickets documenting the relocation of the debris that was initially staged in a floodplain. It also provided documentation to explain its Request for Qualifications to Provide Disaster Recovery Services (RFQ) process and the discrepancies in its claimed force account labor hours and rates.
The FEMA Region IV Regional Administrator (RA) denied the appeal on July 23, 2018, explaining that the Applicant did not comply with the PA program’s requirements to pursue all available insurance proceeds, monitor its contracted debris removal operations, and fully document the debris types, quantities, reduction methods, and pick up and disposal locations. The RA also determined that the Applicant violated Federal procurement and contracting requirements in its improper use of T&M and CPPC contracts and an informal verbal contract arrangement with the subcontractor. In addition, the RA concluded that the Applicant’s documentation did not substantiate its claimed debris amounts, force account labor hourly benefit rates, and force account labor hours exceeding an eight-hour workday. Lastly, the RA found that the Applicant did not establish that its costs were reasonable, nor did it justify the unscheduled rates or the subcontractor’s $110.00 hourly labor rate.
The Applicant filed its second appeal on September 19, 2018, reiterating its previous arguments that it properly monitored and adequately documented its debris removal operations. In addition, the Applicant contends its costs were reasonable, and explains that its primary contractor was vetted, pre-approved, and procured in compliance with state procurement requirements through the RFQ process. The Applicant also requests an opportunity to negotiate with FEMA to settle its claim for a reduced award amount. The Applicant specifically proposes that FEMA award the median cost for debris removal work performed for the instant disaster in the amount of $20.39/cubic yard (CY) in both projects instead of $64.89/CY for PW 502 and $35.03/CY for PW 508. Accordingly, the Applicant now requests $254,711.88 for PW 508 and $90,083.02 for PW 502. The Grantee transmitted the appeal to FEMA on September 27, 2018.
Section 428 of the Robert T. Stafford Disaster Relief and Emergency Assistance (Stafford) Act authorizes funding for eligible debris removal activities under the Public Assistance Alternative Procedures Pilot for Debris Removal, which allows an applicant to opt for an increased Federal cost share for accelerated completion of debris removal, reimbursement of straight-time force account labor, and retention of recycling income generated from recycling debris removal. To receive reimbursement under the Pilot Program, applicants must comply with the requirements in the Public Assistance Alternative Procedures Pilot Program Guide for Debris Removal and all other applicable PA Program requirements found in the Stafford Act, the PAPPG, and all other applicable federal laws and regulations such as all environmental requirements and the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Rules) at Title 2 of the Code of Federal Regulations (2 C.F.R.) Part 200. FEMA has discretionary authority to wholly or partially disallow funding as a remedy for non-compliance with Federal statutes, regulations or the terms and conditions of a Federal award, including PA program eligibility requirements and Federal procurement and contracting standards.
- Debris Removal
According to the PAPPG, applicants are required to monitor all contracted debris operations and document debris quantities, types, reduction methods, and pickup and disposal locations to ensure its contractor removes eligible debris. Applicants may use their own personnel or contractors to monitor debris removal operations, but they jeopardize PA funding for debris removal work if they fail to do so. In this instance, the Applicant has not established that it monitored its debris removal work, nor has it provided sufficient documentation to support each facility’s estimated debris quantity. The Applicant initially provided a spreadsheet with debris estimates by the cubic yard for its six facilities. However, the spreadsheets do not specify the size of the debris loads, nor do they indicate the specific amounts of work that can be attributed to the contractor, subcontractor, and force account labor or equipment. Thus, the Applicant has not provided the documentation required to substantiate the quantities of debris removed.
- Procurement, Contracting Standards, and Reasonable Costs
FEMA provides PA funding for contract costs based on the terms of a contract if an applicant complies with applicable procurement and contracting requirements. In order to demonstrate compliance with Federal procurement and contracting standards, an applicant must also establish that it complied with its own policies and procedures for procurements involving non-Federal funds, and that its costs are reasonable. A cost is considered reasonable if, “in its nature and 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 the cost.” FEMA determines whether costs are reasonable by considering factors such as the facility type, the market price for similar goods or services, availability of resources, project complexities, exigent circumstances, and compliance with procurement requirements.
Here, the Applicant only provided information about its RFQ process, but did not provide the information needed to determine if it complied with its own procurement policies in procuring its debris removal services. Moreover, the Applicant provided no evidence of cost savings that resulted from its use of T&M contracts, nor did it establish that its use of T&M contracts was appropriate in these circumstances given the absence of conditions required under 2 C.F.R. § 200.318(j). The Applicant also did not demonstrate its costs were reasonable because it did not: (1) fully document its debris quantities with monitoring logs, load tickets, or force account equipment activity logs, (2) justify its use of insurance industry software to determine unscheduled rates, nor did it (3) provide timecards or records supporting its force account labor hourly benefit rates and force account labor hours in excess of an eight-hour day.
The Applicant did not monitor its contracted debris removal operations, and has not demonstrated the eligibility of its debris removal costs with documentation fully detailing the debris types, quantities, reduction methods, and pick up and disposal locations. In addition, the Applicant did not demonstrate that it complied with Federal procurement and contracting requirements with respect to its debris removal contractors, nor did it establish its costs were reasonable. Therefore, FEMA appropriately exercised its discretionary authority to disallow all costs claimed in PWs 502 and 508 as a remedy for the Applicant’s noncompliance with PA program eligibility requirements and Federal procurement and contracting standards. Accordingly, the second appeal is denied.
 See Determination Memoranda from Pub. Assistance Div., FEMA at 4 (June 13, 2017) (citing Public Assistance Program and Policy Guide, FP 104-009-2 [hereinafter PAPPG], at 21–22, 30, 56–57 (Jan. 2016)).
 The Applicant claimed $64.89/CY for PW 502 and $35.03/CY for PW 508, as compared with the average and median debris removal costs for Hurricane Matthew of $49.14/CY and $20.39/CY, respectively.
 Letter from Dir., Univ. of Ga. Bd. of Regents, to Dir., Ga. Emergency Mgmt. Agency at 2 (Aug. 17, 2017).
 Letter from Pub. Assistance Div. Dir., Ga. Emergency Mgmt. Agency, to FEMA Region IV (Sept. 1, 2017).
 The Applicant also provided documentation to refute the RA’s finding regarding the availability of additional insurance proceeds. However, this issue will not be considered at this time because the Applicant received no prior notice of this finding and there was no initial insurance review as a result of these projects being processed at $0.00.
 2 C.F.R. § 200.338 (2016).
 Id.; PAPPG, at 21–22.
 Pursuant to 2 C.F.R. § 200.318(j), an applicant may use a T&M contract only under the following conditions: (1) after determining no other contract is suitable, (2) the contract includes a ceiling price; and (3) the applicant providing the necessary oversight to ensure the contractors used efficient methods and effective cost controls.