Allowable Costs and Reasonable Costs

Appeal Brief

Appeal Letter

Appeal Analysis

Background

The coronavirus (COVID-19) pandemic resulted in a major disaster declaration for the state of Florida on March 25, 2020, with an incident period of January 20, 2020, to May 11, 2023. Relevant to this appeal, Hillsborough County (Applicant), a local government, requested Public Assistance (PA) for non-congregate sheltering (NCS) costs incurred from July through October 2020. The Applicant entered into a lease agreement to rent rooms at the West Wing Hotel and the Quality Inn Hotel for the purpose of NCS for quarantining members of the public who were infected or suspected of being infected by COVID-19. FEMA prepared Grants Manager Project (GMP) 154670 to document costs requested from April 30 to August 20, 2020, and GMP 165161 to document the remaining costs requested through October 6, 2020. 

FEMA sent multiple RFIs regarding both projects, seeking documentation for both the used and unused rooms for the costs claimed.[1] The Applicant subsequently identified the number of used and unused rooms from July and September 2020. Between both hotels during the period of July to October of 2020, the Applicant contracted for 37,600 available room nights, of which 1,412 room nights (4 percent) were used.[2] FEMA issued Determination Memoranda (DMs) for both projects denying costs for the unused room nights.[3] 

First Appeal

The Applicant filed appeals for GMP 154670 and 165161 on July 8, 2022, and July 14, 2022, respectively, requesting $1,742,995.00 costs related to the unused room nights. The Applicant stated that it provided secured locations for isolating/quarantining individuals as requested by the Florida Department of Health and could only contract for entire hotel facilities because hotel operators were unwilling to provide individual rooms out of concern for the health and safety of other guests. The Applicant explained it chose these two hotels because they were centrally located, adjacent to one another, and provided a safe layout for quarantine and isolation purposes. The Applicant claimed that at this stage of the pandemic, it was impossible to determine in advance the number of individuals who would need to use the NCS, so it was prudent to comply with the data available at the time and to follow the Department of Health guidance. The Applicant explained its reluctance to cancel the contracts with the hotels due to previous disasters and ongoing COVID-19 pandemic. The Applicant also claimed that it followed federal procurement and contracting requirements and asserted that the costs should be eligible under FEMA’s policy for reimbursement of costs for pre-positioned resources and stand-by time. 

The Florida Division of Emergency Management (Recipient) forwarded the appeals on August 25, 2022, expressing support for the Applicant’s position.

On May 6, 2024, FEMA Region 4 Regional Administrator, issued a consolidated appeal decision, denying $1,742,995.00 for the unused room nights. FEMA stated the lack of hotel room usage indicated the costs were unnecessary and not reasonable. Additionally, FEMA found that the Applicant’s argument of pre-positioned resources or stand-by time was not applicable as there were no labor costs tied to the room. FEMA found that despite the availability of a termination without cause clause, the Applicant did not justify why it maintained the rooms when a small percentage were used.

Second Appeal

The Applicant filed a second appeal on July 5, 2024, requesting $1,742,995.00 and reiterating first appeal arguments. Additionally, the Applicant disputes the rate calculated, and asserts that the number of NCS rooms used were different than what FEMA reported for GMP 165161. The Applicant also discusses that it followed FEMA’s guidance to analyze public health trends and noted a spike in COVID-19 cases in the summer of 2020, which declined later in the year when it terminated the contract. Furthermore, the Applicant states that it leased these and other hotel locations in anticipation of that spike requiring sheltering of up to two percent of the population of Hillsborough County. The Applicant provided previously submitted documentation and in addition included correspondence between itself and FEMA regarding the disputed used room rate and statistical data on Hillsborough County COVID-19 infections. The Recipient forwarded the appeal to FEMA on August 27, 2024, in support of the Applicant.

Discussion

FEMA is authorized to provide assistance for emergency protective measures to save lives and protect public health and safety.^[4] For emergency protective measures to be eligible, work must be required due to an immediate threat resulting from the declared incident.^[5] In limited circumstances, FEMA may reimburse costs related to NCS.^[6] Under the COVID-19 declarations, FEMA will consider requests for reimbursement of NCS for health and medical-related needs, such as isolation and quarantine resulting from the public health emergency.^[7] Any approval of funding is limited to that which is reasonable and necessary to address the public health needs of the event.^[8] To be eligible, costs must be, among other requirements, necessary and reasonable to accomplish the work properly and efficiently.^[9] A cost is 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.^[10] It is the applicant’s responsibility to provide documentation to substantiate its claim as eligible and to clearly explain how those records support its appeal.[11]

The Applicant asserts that leasing all of the rooms in the West Wing Hotel and the Quality Inn Hotel was reasonable and necessary for sheltering potentially COVID-19 positive individuals. The Applicant further asserts that it was required to pay the room rates regardless of occupancy restrictions or use. However, the agreements with both hotels included options for adjusting the terms and termination without notice/cause clauses. 

The Applicant maintains that it needed to keep rooms available for potential COVID-19 cases. However, it did not explain how it evaluated the continued need for these rooms or how it analyzed the population data it presented, simply asserting that it had to lease sufficient space to accommodate an anticipated need of two percent of the County population. Information in the record shows that the number of rooms available were underutilized from July to October;[12] yet, the Applicant does not explain how it assessed COVID-19 information to determine that it was reasonable and necessary to continue to maintain these leases, or why it did not alter or terminate the lease when the rooms were continuously unoccupied.[13] 

The Applicant also asserts in its second appeal letter that there were more used room nights than FEMA previously determined, but the Applicant does not provide additional documentation, beyond correspondence, to substantiate its claim, nor does the Applicant identify documentation in the record which can provide clarity on this claimed discrepancy. 

Here, the Applicant has not demonstrated that the $1,742,995.00 in requested NCS costs were reasonable and necessary to address the public health needs of the COVID-19 declared event.[14]

Conclusion

The Applicant did not demonstrate that the additional NCS costs were reasonable and necessary to address the public health needs of the COVID-19 event. Therefore, this appeal is denied.