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Contract Labor

Appeal Brief Appeal Letter

Appeal Brief

DisasterFEMA-1603-DR
ApplicantCity of Pascagoula
Appeal TypeSecond
PA ID#059-55360-00
PW ID#PWs 7633, 8113, 8247
Date Signed2009-04-21T04:00:00
April 21, 2009

Thomas M. “Mike” Womack
Governor’s Authorized Representative
Mississippi Emergency Management Agency
Post Office Box 5644
Pearl, Mississippi 39208-5644

Re: Second Appeal–City of Pascagoula, PA ID 059-55360-00, Contract Labor,
FEMA-1604-DR-MS, Project Worksheets (PWs) 7633, 8113, and 8247

Dear Mr. Womack:

This letter is in response to your letter dated June 26, 2008, which transmitted the referenced second appeal on behalf of the City of Pascagoula (Applicant). The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of funding for regular time costs for contract employees.

Following Hurricane Katrina, the Applicant used labor from the Public Works Department to perform emergency repairs and debris removal operations. The Public Works Department was comprised of employees from Operations Technologies, Inc. (Optech), a company to which the Applicant outsourced operations of the Public Works Department in 2003. FEMA determined that Optech employees were the functional equivalent of force account labor. Accordingly, FEMA reduced funding by a total of $238,035 on PWs 7633, 8113, and 8247, to account for the cost of regular-time salaries and benefits for Optech employees who performed emergency work.

The Applicant submitted its first appeal to the Mississippi Emergency Management Agency (MEMA) on August 28, 2007. In its appeal, the Applicant claimed that a FEMA Project Officer who prepared the original PW stated that regular-time wages of Optech employees are eligible because they were not employees of the Applicant. The Regional Administrator denied the appeal in a letter dated February 15, 2008, stating that the Applicant regularly budgeted for contract labor from Optetch prior to the disaster and the associated costs were incurred as the equivalent of force account labor.

The Applicant submitted its second appeal on May 1, 2008. In its second appeal, the Applicant asserted that FEMA established a precedent under FEMA-1550-DR-MS by obligating PWs that funded regular-time costs for Optech employees who performed emergency work.
I have concluded that, for purposes of the Public Assistance Program, Optech’s employees are contract labor. FEMA’s regulation at 44 CFR §206.228(a)(2), Force Account Labor Costs, restricts funding for straight time to a subgrantee’s permanently employed personnel. This provision does not apply to contract labor. Therefore, the straight-time pay of Optech employees who performed emergency work is eligible for reimbursement. I have reviewed the information submitted with the appeal and have determined that the Applicant’s second appeal should be granted in full. By this letter, I am requesting the Regional Administrator to take the appropriate actions to implement my decision.
Please inform the Applicant of my decision. This determination constitutes the final decision on this matter pursuant to 44 CFR §206.206, Appeals.

Sincerely,
/s/
James A. Walke
Acting Assistant Administrator
Disaster Assistance Directorate

cc: Major P. May
Regional Administrator
FEMA Region IV

Appeal Letter

Citation: FEMA-1604-DR-MS, City of Pascagoula, Contract Labor,
Project Worksheets (PWs) 7633, 8113, and 8247

Cross-reference: Labor Costs

Summary: Following Hurricane Katrina, the Applicant used labor from the Public Works Department to perform emergency repairs and debris removal operations. The Public Works Department was comprised of employees from Operations Technologies, Inc. (Optech), a company to which the Applicant outsourced operations in 2003. FEMA determined that Optech employees were the functional equivalent of force account labor. Accordingly, funding was reduced by a total of $238,035 on PWs 7633, 8113, and 8247, to account for the cost of regular time salaries and benefits for emergency work performed by Optech employees. In its first appeal, the Applicant claimed that a FEMA Project Officer stated that regular time wages of Optech employees are eligible because they were not employees of the City. The Regional Administrator denied the appeal stating that the Applicant regularly budgeted for the costs of contract labor from Optech prior to the disaster and the costs incurred were the equivalent of force account labor. In its second appeal, the Applicant asserted that FEMA established a precedent under FEMA-1550-DR-MS by obligating PWs that funded regular time costs for emergency work performed by Optech employees. For the purposes of the Public Assistance Program, Optech’s employees are contract labor. Therefore, the straight-time pay of Optech employees who performed emergency work is eligible for reimbursement.

Issues: Are straight time hourly wages for outsourced contract labor performing eligible emergency work compensable?
Findings: Yes.
Rationale: Response and Recovery Policy 9525.7, Labor Costs – Emergency Work
Last updated February 4, 2020