Force Account Labor & Equipment Costs

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	4421
Applicant	Burlington
Appeal Type	Second
PA ID#	057-09550-00
PW ID#	PW 1463
Date Signed	2022-10-31T16:00:00

Summary Paragraph

From March 12 to June 15, 2019, severe storms and flooding caused damage throughout Iowa.  The City of Burlington (Applicant) used Hesco bastions to build temporary flood walls to protect a sanitary lift station and other areas.  FEMA developed Project Worksheet (PW) 1463 to document the Applicant’s emergency protective measures but denied Public Assistance (PA) funding for Hesco bastions the Applicant purchased after the disaster.  The Applicant submitted a first appeal, stating that it used 355 Hesco bastions to build the flood walls.  It stated that rising floodwaters inundated the wastewater treatment plant, contaminating all but 35 of the Hesco bastions.  The Applicant asserted that it purchased the Hesco bastions at issue to replace those contaminated during the disaster.  The FEMA Region VII Regional Administrator partially granted the appeal.  FEMA stated that the Applicant did not receive PA funding for 155 Hesco bastions taken from its own predisaster inventory.  FEMA noted that 35 of these were later recovered; therefore, it approved PA funding for costs to replace the remaining 120 Hesco bastions.  The Applicant submits a second appeal, asserting that the 35 recovered Hesco bastions are also eligible.  The Iowa Department of Homeland Security and Emergency Management (Recipient) supports the appeal and asserts that the recovered Hesco bastions are subject to federal disposition requirements for purchased supplies.

Authorities and Second Appeals

• 2 C.F.R. §§ 200.33, 200.78, 200.94, 200.313(e)(1)-(2), 200.314(a).
• 44 C.F.R. § 206.225(a)(1).
• PAPPG, at 28-30, 42, 61, 63.

Headnotes

• The cost of supplies used to perform emergency work is eligible if purchased and justifiably needed to effectively respond to and/or recover from the incident or taken from the applicant’s stock and used for the incident.
  • The 35 Hesco bastions at issue were used in the performance of eligible work and are therefore eligible for PA funding.
  • Federal regulations governing the disposition of supplies state that the Applicant became the legal owner of the Hesco bastions upon acquisition.
  • Further, the regulations state that project funding must only be reduced by the aggregate value of unused supplies.  None of the Hesco bastions at issue were unused.
  • Therefore, the Applicant is the legal owner of the 35 Hesco bastions and may retain them with no further financial obligation to FEMA.  

Conclusion

Costs totaling $12,383.70 for the 35 recovered Hesco bastions are eligible for PA funding; additional deobligations due to their post-disaster disposition are not necessary.  Therefore, this appeal is granted.

 

Appeal Letter

Appeal Analysis

Background

From March 12 to June 15, 2019, severe storms and flooding caused damage throughout Iowa.[1]  The City of Burlington (Applicant) utilized force account labor, equipment, materials, and contracted work to pump floodwaters and build temporary floodwalls to protect a sanitary lift station and other areas.  The Applicant used Hesco bastions to build the floodwalls.[2]

FEMA developed Project Worksheet (PW) 1463 to document the Applicant’s emergency protective measures and awarded $313,794.33 in Public Assistance (PA) funding for the project on October 9, 2020.  In a large project closeout request dated May 11, 2021, the Iowa Department of Homeland Security and Emergency Management (Recipient) recommended approval of $312,997.89 in final project costs.  Among other items, it transmitted documentation detailing the Applicant’s purchase of Hesco bastions during and after the incident period, as in the table below.

Vendor	Purchase Order/Approval Date	Quantity	Cost
Hesco Bastion, Inc.	March 12, 2019	200	$73,000.00
Two Rivers Bank & Trust	September 16, 2019	130	$15,000.00
Hesco Bastion, Inc.	February 10, 2020	170	$60,150.00

In a Determination Memorandum dated October 6, 2021, FEMA denied $75,150.00 for the two purchases made after the disaster.  FEMA noted that in authorizing the purchase from Two Rivers Bank & Trust, the Applicant stated that the Hesco bastions would “add to the stock and help reduce the need for a future order.”[3]  Thus, FEMA found that the Applicant “appears to have purchased additional Hesco barriers for uses not related to [the disaster] but for future use” unrelated to a declared event.[4]

First Appeal

In a letter dated December 13, 2021, the Applicant submitted a first appeal requesting FEMA reverse its earlier decision and approve PA funding for the Hesco bastions.  The Applicant stated that it used 355 Hesco bastions to build the floodwalls, consisting of 155 Hesco bastions from its predisaster inventory, and 200 that it purchased from Hesco Bastion, Inc. on March 12, 2019.  It stated that during the disaster, rising floodwaters inundated the wastewater treatment plant, contaminating 320 of the Hesco bastions in the floodwalls; the remaining 35 were not damaged and were later recovered.  The Applicant stated that both post-disaster purchases were made to replace the Hesco bastions contaminated during the disaster and asserted that the costs were eligible under FEMA policy.  In a transmittal letter dated February 3, 2022, the Recipient expressed support for the appeal.

On April 28, 2022, the FEMA Region VII Regional Administrator partially granted the appeal.  FEMA stated that the Applicant received $73,000.00 in PA funding for its first purchase of 200 Hesco bastions on March 12, 2019.  It stated that these Hesco bastions were used to build the floodwalls and were contaminated and later disposed of.  FEMA stated that the Applicant “now seeks to replace the 200 damaged barriers” but determined that “[t]hese costs are not eligible because FEMA does not replace supplies purchased with PA funding and then used during the major disaster.”[5]  However, FEMA recognized that PW 1463 did not document the use of the 155 Hesco bastions from the Applicant’s predisaster inventory.  It stated that 35 of these were undamaged and later recovered.  Therefore, FEMA found that the remaining 120 Hesco bastions from the Applicant’s predisaster inventory were damaged by the disaster, and $42,458.40[6] for their replacement was eligible for PA funding.

 

Second Appeal

In a letter dated June 16, 2022, the Applicant submitted a second appeal requesting FEMA provide $54,842.10 to replace all 155 Hesco bastions it used from its predisaster inventory.  The Applicant states that when constructing the floodwalls, it used all of its predisaster inventory first; it then added to these barriers with the 200 Hesco bastions purchased on March 12, 2019.  Thus, the Applicant explains that the 35 undamaged Hesco bastions it recovered following the disaster came from those it purchased during the incident period, which FEMA found eligible.  It asserts that all 155 Hesco bastions in its predisaster inventory were contaminated and should be eligible for replacement.

In a transmittal letter dated August 1, 2022, the Recipient expresses support for the appeal.  The Recipient asserts that all 155 Hesco bastions in the Applicant’s predisaster inventory were destroyed and are therefore eligible for reimbursement.  Further, it states that the 35 Hesco bastions the Applicant recovered after the disaster may be subject to disposition requirements set forth in Title 2 of the Code of Federal Regulations (2 C.F.R.) § 200.314, which the Recipient states, “may require later reimbursement to FEMA, but this would occur after obligation.”[7]  The Recipient clarifies that the amount in dispute is $12,383.70.[8]

 

Discussion

FEMA is authorized to provide PA funding for emergency work conducted before, during, and after an incident, including flood fighting activities, that eliminates or lessens an immediate threat to life, public health and safety, or improved property.[9]  The cost of supplies used to perform emergency work is eligible if purchased and justifiably needed to effectively respond to and/or recover from the incident, or, taken from the applicant’s stock and used for the incident.[10]  Applicants must calculate the current fair market value of any unused residual supplies that FEMA funded for any of its projects and determine the aggregate total.[11]  Pursuant to 2 C.F.R. § 200.314(a), FEMA reduces eligible funding by the current fair market value of unused residual supplies if the aggregate total is greater than $5,000.00.[12]

The Applicant used 355 Hesco bastions in constructing the floodwalls.  FEMA approved PA funding for 320 Hesco bastions but did not provide funding for 35 Hesco bastions the Applicant later recovered.  On second appeal, the Applicant asserts that all of the Hesco bastions are eligible and requests an additional $12,383.70 for the 35 Hesco bastions it used in response to the disaster and was able to recover.  The Recipient asserts that the 35 recovered Hesco bastions are subject to federal disposition requirements set forth in 2 C.F.R. § 200.314.

The fact that the Hesco bastions at issue were not contaminated, and were later recovered, is immaterial to the eligibility of initial PA funding for their costs.  The 35 Hesco bastions were used in the performance of eligible work and are therefore eligible for PA funding.  On second appeal, the Recipient also questions whether federal disposition standards for supplies require the Applicant to provide remuneration for the recovered Hesco bastions.

The federal regulation governing the disposition of supplies states that the Applicant became the legal owner of the 35 Hesco bastions upon acquisition.[13]  This is true whether the Hesco bastions were purchased prior to the disaster or at some point during the incident period.  Further, as stated above, the regulation specifies that project funding must be reduced only by the value of residual stocks of unused supplies, if their aggregate value is greater than $5,000.00.  The 35 Hesco bastions at issue were all used in the performance of eligible work; there is no residual stock of unused Hesco bastions under consideration on appeal.  Therefore, the Applicant is the legal owner of the 35 Hesco bastions at issue and may retain them with no further financial obligation to FEMA.  

 

Conclusion

Costs totaling $12,383.70 for the 35 recovered Hesco bastions are eligible for PA funding; additional deobligations due to their post-disaster disposition are not necessary.  Therefore, this appeal is granted.

 

[1] The President issued a major disaster declaration on March 23, 2019.

[2] Hesco bastions (also called Hesco barriers or baskets) are large fabric bags within a rectangular wire frame, open on one end.  Multiple Hesco bastions can be placed together and filled with earth, sand, or rock to create a flood wall or reinforce an existing levee.  See Hesco Bastion, Inc., Flood and Erosion Control, https://www.hesco.com/‌solutions/flood-protection/ (last viewed Aug. 18, 2022).

[3] Dir. of Admin. Servs., City of Burlington, Council Item, Resolution 2019-593, at 1 (Sept. 16, 2019).

[4] FEMA Region VII, Eligibility Determination Memorandum, Burlington, Project Worksheet 1463, at 3 (Oct. 6, 2021).

[5] FEMA First Appeal Analysis, Burlington, FEMA-4421-DR-IA, at 4 [hereinafter First Appeal Determination].

[6] FEMA calculated eligible costs by determining a price per unit of $358.82 multiplied by 120 eligible units.  FEMA based the price per unit on an October 21, 2019, invoice from Hesco Bastion, Inc.

[7] Letter from Alternate Governor’s Authorized Representative, Iowa Dep’t of Homeland Sec. and Emergency Mgmt., to Acting Reg’l Adm’r, FEMA Region VII, at 4 (Aug. 1, 2022).

[8] The difference between the cost for 155 Hesco barriers ($54,842.10) and the amount approved on first appeal for 120 Hesco barriers ($42,458.40).

[9] Title 44 Code of Federal Regulations (44 C.F.R.) § 206.225(a)(1) (2018); Public Assistance Program and Policy Guide, FP 104-009-2, at 42, 61 (Apr. 1, 2018) [hereinafter PAPPG].

[10] PAPPG, at 28, 63.  Federal regulation defines supplies as all tangible personal property that does not fall under the definition of equipment.  See Title 2 Code of Federal Regulations (2 C.F.R.) § 200.94 (2019).  Equipment is defined as tangible personal property having a useful life of more than one year and a per-unit acquisition cost that equals or exceeds the lesser of the capitalization level established by the applicant for financial statement purposes, or $5,000.00.  2 C.F.R. § 200.33.  Personal property is property other than real property.  See 2 C.F.R. § 200.78.  On first appeal, FEMA determined that Hesco bastions meet the definition of supplies.  See First Appeal Determination, at 3.  This categorization is not in dispute on second appeal.

[11] PAPPG, at 29.

[12] 2 C.F.R. § 200.314(a); PAPPG, at 30.  See generally, 2 C.F.R. § 200.314(a) directs that the amount of compensation be computed in the same manner as that used for equipment in 2 C.F.R. § 200.313(e)(2), which discusses using current market value.

[13] 2 C.F.R. § 200.314(a) (“[t]itle to supplies will vest in the non-Federal entity upon acquisition”).