Improved Project - Procurement - Direct Administrative Costs
|PW ID#||(PW) 1799|
Conclusion: Joplin Schools (Applicant) failed to seek additional funding in a timely manner, and did not justify its request for Cost Estimating Format (CEF) adjustments. The Applicant’s procurement of administrative services did not comply with federal standards, and the Regional Administrator exercised appropriate discretion in awarding Direct Administrative Costs (DAC) capped at $155 per hour and denying travel costs or costs incurred when no contract was in place.
On May 22, 2011, a tornado damaged the concession stand building on the grounds of Joplin High School, which qualified for replacement. FEMA prepared Project Worksheet (PW) 1799, and, in 2013, approved an improved project to rebuild the concession stand at the new Joplin High School being rebuilt at a different location. In 2014, the Applicant requested an increase to the funding cap for higher costs not reflected in the CEF. FEMA denied the request as untimely. The Applicant renewed its request at project closeout in 2016, and FEMA again denied the request as untimely. The Applicant also sought DAC at closeout. FEMA found that the Applicant’s procurement of its DAC contracts did not meet federal standards, but awarded reasonable costs at a maximum rate of $155 per hour, while denying travel costs and costs incurred while there was no contract in place. The Applicant appealed, reiterating its prior arguments. The Regional Administrator denied the appeal, finding that the Applicant’s request was untimely and the requested cost increases were unsupported. Regarding DAC, it determined that the $155 hourly cap was reasonable absent justification warranting a higher rate, so additional DAC funding was ineligible. The Applicant submitted a second appeal, arguing that it could seek a revision in the SOW at any point before closeout. It argues that its procurement of DAC contracts complied with federal regulations, its actual costs were reasonable, and the travel costs were reasonably apportioned.
Authorities and Second Appeals
- Stafford Act § 324.
- 2 C.F.R. pt. 225, app. A § (C)(2).
- 44 C.F.R. §§ 13.30, 13.36, 13.43, 206.201-206.203, 206.206, 206.226.
- DAP 9529.9, at 2-5.
- PA Guide, at 51-52, 79, 96, 110, 139-140.
- Martinsville CUSD, FEMA-1771-DR-IL, at 4.
- City of Cedar Rapids, FEMA-1763-DR-IA, at 7, 11.
- Columbus Reg’l Hosp., FEMA-1766-DR-IN, at 7-8.
- City of Nome, FEMA-4050-DR-AK, at 5-6.
- 44 C.F.R. 13.30 requires applicants to notify FEMA when the need for additional funding is anticipated.
- The Applicant did not identify the additional costs until more than a year after the PW was obligated despite knowing that it intended to seek additional funding.
- Under 44 C.F.R. § 206.206, the burden is on the Applicant to substantiate its appeal with documented justification.
- The Applicant failed to justify its request for increased costs and CEF factors.
- 44 C.F.R. § 13.36 requires full and open competition unless public exigency or emergency makes competition infeasible.
- The Applicant did not demonstrate that any public exigency or emergency made noncompetitive procurement necessary.
- Following a procurement noncompliance, 44 C.F.R. § 13.43 authorizes FEMA to award reasonable costs as an enforcement action.
- Awarding hourly costs capped at $155 per hour, but disallowing, travel costs and costs incurred when no contract was in place, was an appropriate exercise of discretion.
Ernie Rhodes, Director
Missouri Department of Public Safety
State Emergency Management Agency
2302 Militia Drive
P.O. Box 116
Jefferson City, MO 65102
Re: Second Appeal – Joplin Schools, PA ID: 097-U4T46-00, FEMA-1980-DR-MO, Project Worksheet (PW) 1799 – Improved Project - Procurement - Direct Administrative Costs
Dear Mr. Rhodes:
This is in response to a letter from your office dated February 1, 2018, which transmitted the referenced second appeal on behalf of Joplin Schools (Applicant). The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $109,392.03 in cost increases and Direct Administrative Costs (DAC) above those previously awarded.
As explained in the enclosed analysis, I have determined that the Applicant failed to seek funding for additional costs in a timely manner, and failed to justify its request for adjustments to the cost estimate. Regarding DAC, the Regional Administrator took appropriate action in awarding costs capped at $155 per hour, as a remedy for the Applicant’s noncompliance with procurement regulations. It was also proper, in accordance with federal regulation, not to award travel costs or costs incurred during a period when no contract was in place. Accordingly, I am denying this second appeal.
Please inform the Applicant of my decision. This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.
Public Assistance Division
cc: Paul Taylor
FEMA Region VII
On May 22, 2011, a catastrophic EF-5 tornado struck Joplin, Missouri. The accompanying high winds and flying debris damaged the concession stand building on the grounds of Joplin High School, which is owned and operated by Joplin Schools (Applicant). FEMA determined that the building was more than 50 percent damaged and warranted replacement, and created Project Worksheet (PW) 1799 to address the replacement. On February 12, 2012, FEMA obligated Version 0 of the PW which contained an estimate based on a cost estimating format (CEF). The PW provided that eligible Direct Administrative Costs (DAC) would be captured in a subsequent amendment. FEMA obligated PW 1799 Version 1 on March 4, 2013, in the total amount of $249,745.00.
On March 13, 2013, the Applicant requested an improved project, seeking to rebuild the concession stand building at Joplin High School’s new location. On May 2, 2013, FEMA approved the request and prepared PW 1799 Version 2 which reflected approval of the improved project but did not obligate any additional funding.
On June 30, 2014, the Applicant submitted a request to the Missouri Department of Public Safety (Grantee) seeking additional funding for what it called errors and omissions. It stated that it hired an architectural firm to compare drawings of the concession stand to the FEMA CEF estimate. It first stated that its architectural firm had prepared a new CEF using a different city adjustment factor drawn from 2011 Quarter 4, rather than the 2011 Quarter 3 factor that FEMA had used, which resulted in an increase of estimated costs for each CEF item. It also stated that it used a different factor to estimate additional total soft costs for the project. It did not explain how it arrived at the new factor, but argued that an adjustment was necessary because Joplin High School was required to be relocated to a higher elevation. It also argued that the changes should have been made to match PW 1980, which addressed the rebuilding of Joplin High School. The Applicant also stated that its construction management firm had recently competed two Kansas City area school projects that cost 24 percent lower than comparable Joplin schools, and requested a funding increase of 17 percent to account for adverse economic conditions and a shortage of sub-contractors and labor. In total, the Applicant requested a total increase in funding of $108,622.55.
On August 7, 2014, FEMA denied the Applicant’s request as untimely, stating that the Applicant had 60 days from the approval of the improved project to appeal the amount of the grant. Rather than appeal FEMA’s determination, the Applicant renewed its request for additional funding above the approved improved project cap at closeout. Its request came in a letter dated January 26, 2016, which was nearly identical to the 2014 request. The Applicant’s arguments were the same, but it used a smaller factor for CEF soft costs bringing its total request down to $101,908.81.
At closeout, the Applicant also sought reimbursement for DAC, including force account labor in the amount of $2,286.66, and services contracted from Witt Associates (Witt) in the amount of $18,485.93. The Applicant contracted with Witt to provide professional services for a term to run from June 9, 2011, through June 8, 2014. Prior to its expiration, the Applicant signed a Cooperative Purchasing Agreement with the Houston-Galveston Area Cooperative (HGAC) which authorized the purchasing of services from certain designated contractors, including Witt. The Applicant then signed a second agreement with Witt, designated Task Order No. 1, with a term beginning January 1, 2012, and continuing through May 31, 2013, and with minor changes from the original agreement.
In response to these requests, FEMA prepared a determination memorandum stating that the Applicant had 60 days from the approval of the improved project to appeal the amount of the capped funding. It also noted that the improved project was capped at the amount associated with restoring the facility to its predisaster design, but that the Applicant was requesting an amount which equaled the entire cost of the improved project. Finally, it stated that the Applicant had not separated the actual cost of completing the original scope of work (SOW) from the cost to complete the improved project, and that these costs could not be tracked separately because of the alterations to the facility’s predisaster design. Accordingly, these costs were determined to be ineligible.
With respect to DAC, FEMA concluded that the there was no documentation supporting the selection of Witt or that it was the least cost alternative available. FEMA determined that it could award reasonable costs and capped the rates at $155 per hour. It disallowed any DAC costs claimed for a period not covered by one of the contracts with Witt, as well as those travel expenses that had been allocated across various PWs. FEMA found that all claimed force account DAC was eligible. Accordingly, it awarded an additional $13,289.37 in DAC.
In accordance with the determination memorandum, FEMA prepared PW 1799 Version 3, which included the additional DAC found to be eligible, for a final approved amount of $263,034.37.
First Appeal Letter
The Applicant appealed FEMA’s determination in a letter dated April 27, 2017. First, the Applicant stated that, when PW 1799 was being formulated, FEMA would prepare a draft PW with a SOW and estimated costs, and then give the Applicant five business days to propose revisions. FEMA would then take the Applicant’s revisions and create a new draft, which the Applicant would again have five business days to review. It asserted that this was an unattainable and unfair timeline for analysis, and that it found it difficult to participate in the formulation of the PWs when completion of the replacement school facility was its priority. It stated that it believed at the time that the SOW was not correct, but believed that FEMA would continuously amend the PW through closeout.
The Applicant argued that it was not required to appeal the obligated PW if it disagreed with the obligated amount, but rather all it needed to do was request a new PW version at some point when changes were identified. It argued that it could not have made the request until its architectural firm had completed its review. It argued that FEMA had informed it that it could continue to request revisions to the PW, and attached an email exchange in which it asked a FEMA employee the following:
I understood you to say a project could be declared an Improved Project and a subsequent Request for Version Change could be approved for any error or omissions or single line item within that PW, including approval of this scenario: a version change to the PW line item estimate of cost/sq ft, if competitive bid costs come in higher than the estimate listed in the PW. Is this correct?
The FEMA employee responded, “If the cost per square foot is related to approved FEMA scope and in line with appropriate codes and standards, your statement is correct.” The Applicant also clarified that the requested increase in funding related only to the project originally described in the PW, and not the improved school that it eventually built.
With respect to DAC, the Applicant explained that on May 26, 2011, Witt submitted a proposal to provide disaster recovery administrative services, and the Applicant entered into a three-year agreement with Witt on June 1, 2011. On December 22, 2011, the Applicant joined HGAC, and replaced the existing agreement with Witt with Task Order No. 1, reflecting its selection of Witt through HGAC but leaving the rate schedule and reimbursable expenses at the same or lower rates. In January 2016, the Applicant agreed to Task Order No. 1, Modification No. 1, which extended the agreement to May 31, 2016, and left the rate schedule and reimbursable expenses unchanged from Task Order No. 1. The Applicant argued that there was no requirement that it contract with the lowest cost provider. It stated that it entered into the original agreement with Witt under its authority to quickly contract in an emergency situation without having to compare competing proposals. It argued that this was reasonable because the rate that Witt gave them was the same or lower as that given to other clients, including the U.S. General Services Administration (GSA). The Applicant stated that the reasonableness of its decision to contract with Witt was confirmed when it later joined HGAC and received the lowest rate, regardless of whether it was on the HGAC schedule or in the original contract. It argued that HGAC was an appropriate tool to confirm that its original contract with Witt was properly procured.
Next, the Applicant argued that, apart from the procurement issue, Witt’s contract rates were reasonable and that FEMA should not have set $155 per hour as the reasonable rate. It argued that Witt’s contract rates for the Applicant were the same as those provided for other HGAC members and for other government entities. It stated that it determined that Witt’s proposed prices and services more closely met its needs compared to alternatives, although it did not specify what alternatives were considered or what criteria it used in its evaluation.
Regarding travel costs, the Applicant explained that these costs were for travel activities that allowed Witt’s employees to provide services under the contract. It argued that it was reasonable to take these costs and apportion them among the various projects that the particular Witt employee worked on, distributed according to the time utilized for each project. It argued that the 2014 regulations in 2 C.F.R. Part 200 clarified the older regulations that were in effect at the time of the disaster, and that the later regulation stated that if a cost benefitted two or more projects or activities in proportions that can be determined without undue effort, the cost should be allocated to the projects based on proportional benefit. If the proportional benefit could not be determined, then the costs could be allocated or transferred between the projects on any reasonable documented basis.
Finally, the Applicant argued that contracts were in place for the entire duration of the period during which Witt charged the Applicant for disaster recovery services. It again recounted the series of contracts that it entered into with Witt, and asserted that the agreements were confirmed to extend from the initial date through May 31, 2016. It argued that the parties intended to continue their relationship, so it did not matter that there was no signed contract in place for a time. On May 3, 2017, the Grantee forwarded the Applicant’s appeal to FEMA.
Final Request for Information
On August 8, 2017, FEMA sent the Applicant and Grantee, a final request for information (Final RFI), first requesting that the Applicant clarify the amount that it was seeking in its first appeal. Next, it requested specific reasons why 2011 Quarter 4 data should have been used for the CEF, the architectural firm’s worksheets, a detailed explanation of how the architectural firm formulated its CEF calculations and what sources it relied upon, the total CEF soft cost factor that the Applicant was seeking, an explanation of why the CEF soft cost factors in the PW were erroneous, and documentation supporting its claim for a 17 percent cost escalation. The Final RFI also questioned when the Applicant determined that it needed an architectural firm to review the CEF, why it did not inform FEMA of its intention, and how its current request for a CEF adjustment is different from the request raised in its prior appeal. It also asked why the Applicant did not appeal previously, and why it waited so long to make its request for additional funding.
With respect to DAC, the Final RFI requested documentation showing who recommended Witt to the Applicant, what the Applicant’s reason was for using non-competitive procurement, what other providers’ rates were considered when conducting a cost analysis, and whether any of the services contracts were competitively bid. It also asked the Applicant to justify hourly rates in excess of $155 per hour and document any travel costs that were incurred specifically for PW 1799.
The Applicant responded to the Final RFI in a letter dated September 7, 2017. It first clarified that the total increase it was seeking was $109,392.03. It also noted that it was only seeking funding related to the original replacement project. Additionally, there was no separate tracking of improvements because the work described in the PW was not actually performed, given that the school was rebuilt in a different configuration and at a different location. To the request for explanations, justifications, and calculations underlying the requested funding increase, the Applicant replied that it was relying on its previous submissions. Additionally, it stated that additional funding was necessary because it required a preliminary engineering report and project manager, and costs were higher because the school would have been rebuilt above the floodplain.
The Applicant stated that it was working with its architectural firm as far back as January 2012, but argued that it was under no obligation to inform FEMA of its intention to review the CEF. It stated that it could not have requested additional funding until its architectural firm completed the review. It argued that the total CEF factor for soft costs should at least have matched that used in PW 1980, and should actually have been even higher to reflect increased costs. It argued that the cost escalation was due to extensive construction in Joplin in the wake of the disaster. Regarding specific CEF factors, it stated that the increases were due to the requirement for a preliminary engineering analysis due to FEMA’s requirement that the school be relocated to higher ground, and to match CEF factors for PW 1980.
With respect to DAC, the Applicant stated that it entered into the agreement with Witt because it had extensive experience in disaster recovery and its rates were reasonable, and stated that comparing Witt’s rates to those offered to the GSA constituted a sufficient cost analysis. It reiterated that it initially contracted with Witt under its authority to procure emergency services. It argued that Task Order No. 1, entered into after it joined HGAC, was a compliant procurement, and the reasonableness of Witt’s rates was confirmed. It argued that it compared Witt’s services and rates to other HGAC vendors, and based on this simple but appropriate cost analysis, there was no reason to replace Witt or put the contract out for bid. The Applicant noted that Witt’s rates were not specific to a single PW, but were to support all of the Applicant’s projects. Regarding travel expenses, the Applicant reiterated its position that proportionally allocating such expenses between PWs was allowable under federal cost attribution guidelines.
Regarding the request for a justification of hourly rates above $155 per hour, the Applicant responded, first, that such a cap was illegitimate because it was unclear how that rate was reached, and Witt’s rate schedule was at or below the rate schedule provided through the GSA. It argued that there could not be one fixed cap to be universally applied at all times for all disasters. Regarding travel costs, the Applicant reiterated its explanation as to how it allocated travel costs between various PWs.
First Appeal Decision
On November 30, 2017, FEMA’s Region VII Regional Administrator (RA) denied the first appeal. The RA first noted that this appeal involved issues similar to issues raised in first appeals of PWs 488, 575, 1336, 1438, 1684, and 1980, and incorporated the administrative records of those appeals by reference. The RA then noted that the Applicant had opportunities to appeal the funding cap throughout the process, but failed to do so. The RA explained that, despite the Applicant’s insistence that it did not need to file an appeal, FEMA’s policy did not allow it agree to a SOW and funding cap, despite knowing that it intended to seek additional funding, and wait until closeout to raise a challenge to the cap.
The RA also stated that the Applicant had many opportunities, including weekly meetings, to inform FEMA that it disagreed with the funding cap, but instead chose to wait over 15 months after PW 1799 Version 2 was obligated. Then, after the Applicant’s first request for an increase was denied, it failed to appeal, but waited another 17 months before raising its request again. Moreover, the RA explained that FEMA’s regulations required applicants to inform FEMA whenever the need for additional funding is anticipated. Accordingly, contrary to the Applicant’s argument, it was required to inform FEMA of its intention to retain an architectural firm and seek additional funding. Instead, it waited until after the concession stand was demolished and could no longer be inspected. Regarding the email exchange that the Applicant attached to its first appeal, the RA stated that FEMA did not give wrong advice because at no time during the grant process did the Applicant make a request for a budget revision based on a bid that came in higher than estimates. Similarly, the RA found that the Applicant’s request for a 17 percent cost increase was unsupported by any documentation.
Regarding the CEF factors, the RA first found that the Applicant did not provide any justification for using 2011 Quarter 4 data rather than data from Quarter 3 other than that PW 1980 used 2011 Quarter 4. This was not a sufficient justification because FEMA used the data that was available when the CEF was created, and there was no justification for adjusting the CEF because a later PW used different data. Regarding the CEF soft cost factors, the RA found that the Applicant had failed to provide a documented justification showing that the CEF factors that FEMA used were incorrect or substantiating their request for higher factors. The fact that a different project used different numbers was not a sufficient justification. The RA additionally found that some of the Applicant’s request for soft cost increases appeared duplicative of its prior appeal. Even if they were not, the RA determined that the Applicant had not supplied any calculations, data, or other documentation to justify an increase in the soft cost estimate.
Turning to the issue of DAC, the RA determined that the Applicant’s initial decision to contract with Witt without competition did not comply with federal procurement standards, or the Applicant’s own guidance. It did not meet federal standards because the Applicant did not establish that a competitive procurement was not feasible or that any public exigency would not have permitted a delay from competitive selection. Moreover, the Applicant did not comply with its own procurement standards because it did not establish that non-competitive procurement was required to protect against loss of property or minimize a serious disruption in services, that it used as much competition as was practical under the circumstances, or that the contract was limited to a purchase necessary to alleviate the emergency. The RA noted that, even if there had been an emergency that justified non-competitive procurement, this was a three-year contract and was not limited to meeting any exigency. The RA also determined that Applicant was aware of the need to utilize competitive procurement since at least June 2011 because it discussed the possibility of a waiver of procurement requirements during meetings with FEMA and was told that no waiver would be given. Finally, the RA determined that the Applicant did not perform the required cost analysis for its contract with Witt. While it claimed to have reviewed the prices given from other HGAC vendor, it did not document this assertion, and, in any event, that was not a sufficient cost analysis.
With respect to Task Order No. 1, the RA discussed whether this represented an amendment to or a termination of the original contract, but ultimately concluded that either way the procurement did not comply with federal requirements. As a new procurement, it was not competitively procured because selecting from a list of HGAC vendors was not free and open competition. As an amendment it could not cure the original non-competitive procurement with a second non-competitive process and created the additional problem that it reduced covered period from 2014 to 2013. Modification No. 1 also did not comply with federal procurement requirements because it was not accepted until after the request for closeout and well after the expiration of the prior contract. The Applicant could not retroactively extend the prior contract in this manner and, even if it could, it still did not remedy the problems described above.
In light of these procurement violations, the RA determined that FEMA had acted within its discretion to award costs that it determined to be reasonable through June 8, 2014. The RA determined that it was appropriate to use a rate of $155 per hour and require a justification for a higher rate. The Applicant’s only proffered justification was that Witt offered the same fee schedule to other HGAC members and through a GSA contract. The RA explained that these facts could not establish that a higher rate was reasonable for market conditions for this particular disaster and location. For any individual who billed above $155 per hour, the RA found that the Applicant had not demonstrated that such a rate was appropriate to the complexity of the work, the amount of time required to perform it, and the skill level required to perform the activities. Finally, with respect to travel-related DAC, the RA found that these were indirect costs that could not be readily attributable to specific PWs. Thus, they were reimbursable as project management costs that FEMA already funded, and were not reimbursable as DAC.
Accordingly, the RA denied the Applicant’s first appeal on all of the issues raised.
The Applicant filed a second appeal in a letter dated January 29, 2018. It begins by arguing that it was not required to appeal the obligated PW, even it if disagreed with the amount of capped funding. It reiterates is prior assertion that it was not given enough time to review the PWs, and found it difficult to participate in the PW formulation while trying to restore school operations. It acknowledges that it did not believe that the PW captured everything required to replace the concession stand, but argues that PWs may be continually amended up until final closeout. It acknowledges that FEMA’s PA Guide states that if an applicant believes eligible costs exceed the original estimate the amount of the grant can be appealed, but argues that this does not require a formal appeal, only a request for an amendment to the PW at some point during the grant process. It also asserts that such a requirement conflicts with advice it received from a FEMA employee, and again references the email exchange it included with its first appeal. The Applicant argues that it could not have made the request earlier because the information was not available until its architectural firm completed its analysis of the CEF.
With respect to DAC, the Applicant argues that its procurement of Witt’s services complied with federal standards because Witt had a good reputation as a provider of disaster recovery assistance services and it offered at or below the rates it offered through its GSA contract. It characterizes the first appeal decision as finding that a term of three years was not allowable for disaster recovery services and argues that disaster recovery often takes much longer than three years. It maintains that it was supervising Witt throughout the process and ensuring costs were reasonable. It argues that when it joined HGAC, it confirmed that its procurement of Witt complied with federal requirements. While Task Order No. 1 had an expiration date of May 31, 2013, the Applicant states that it needed Witt’s services and intended to continue the relationship through May 31, 2016, and therefore, it did not matter that there was no signed contract in place for a period of time.
Next, the Applicant argues that FEMA should not have established $155 per hour as the only reasonable rate. It again asserts that Witt’s rates were at or below those offered in its GSA contract, and argues that this makes them reasonable.
Finally, the Applicant argues that its allocation of Witt’s travel-related costs among various PWs was proper. It explains that all Witt employees prepared daily timesheets indicating the hours that they worked on specific PWs, and that hours not related to a specific PW were considered to be indirect management costs. It further explains that it took each employee’s travel related costs and divided them by the total number of hours worked, thereby proportionally allocating them among the various PWs. It argues that this process is reasonable and conforms to federal cost allocation standards. Finally, the Applicant argues that the entire period during which Witt provided services was covered by contract.
The Grantee forwarded the Applicant’s second appeal on February 1, 2018, without a recommendation.
FEMA provides Public Assistance (PA) funding for work to restore damaged eligible facilities to their predisaster design, function, and capacity in accordance with applicable codes and standards. When performing permanent restoration work, if an applicant decides to make improvements to the facility while still restoring its predisaster function, it may request an improved project. PA funding for improved projects is limited to the costs that would be associated with repairing or replacing the damaged facility to its predisaster design. This limit represents a funding cap, and the balance of the funds required to complete the project is the applicant’s responsibility. If an applicant believes that eligible costs exceed the estimate, and those costs can be tracked and documented separately from the improvements, then the applicant may appeal the amount of the grant.
There are certain instances where FEMA may adjust the funding cap of an improved project for errors and omissions, for example, where an applicant has proven that additional costs are necessary to complete the original SOW, when the applicant demonstrated that the PW underestimated the costs required to complete the original SOW, or where it was later discovered that the PW’s CEF contained a calculation error. However, FEMA has denied requests to adjust funding caps in situations where the additional funding requested was associated with work FEMA did not approve, or the costs were inappropriate to the original SOW. However, if an applicant discovers that additional work or costs are necessary to complete a project, the applicant should notify the state as soon as possible. It should not be assumed that such costs can be reported at the end of the project and that additional funds will be approved.
The CEF provides a uniform method of estimating costs for large projects. The first part of the CEF is Part A, and it is designed to capture the detailed construction costs required to complete the eligible SOW. These base costs can be derived from cost estimating resources, such as RSMeans. When using national industry standard cost data, city cost indices are used to adjust national unit prices to the nearest city. Then, a series of factors (Parts B through H) are applied that represent potential additional eligible project costs that can reasonably be expected to be incurred because they are usually encountered during the course of a construction project. It is the applicant’s burden to substantiate its appeal.
In its second appeal, the Applicant does not directly address FEMA’s first appeal analysis regarding the CEF factors, although it attaches copies of the arguments it raised previously. Specifically, the Applicant claimed that RSMeans data should have been drawn from 2011 Quarter 4 data, rather than from earlier quarters, and the Part A cost estimate should have been increased by an additional 17 percent because of cost escalations.
This is not a situation where the PW’s SOW omitted work that had already been determined to be eligible, nor where the Applicant demonstrated through bids or some other documentation that the CEF underestimated costs associated with an eligible item of work. This was also not a situation where the Applicant discovered hidden damage during the performance of eligible work. All of the facts upon which this request was based were available to the Applicant at the time that it agreed to the funding cap in PW 1799. The Applicant had the opportunity to raise these requests in 2012 when it filed its previous first appeal that addressed other CEF factors, or in 2013 when it sought an improved project. It has not established that the alleged need for additional funding could not have been discovered earlier in the process.
Moreover, the Applicant’s requests were without merit. First, the RA properly found that the Applicant had not demonstrated that 2011 Quarter 4 data should have been used. Those numbers were unavailable when the estimate was originally created, and the Applicant has not provided any documentation showing that the estimate was inaccurate. The Applicant argued that FEMA used the 2011 Quarter 4 data in the CEF for another project, but the RA correctly rejected this argument because that other CEF was created after the 2011 Quarter 4 data became available, and thus has no bearing on whether the CEF for PW 1799 was properly created. To the extent that the Applicant intended to request other changes to the CEF factors, it has failed to articulate what other changes it sought or why.
Second, the RA correctly determined that the Applicant had not substantiated its request for a 17 percent increase in funding. The Applicant provided no basis for this increase other than to say that its construction company had recently completed a different project in a different city at a lower cost. This was not a sufficient reason to adjust the CEF. Accordingly, the Applicant did not demonstrate that any changes in the CEF factors were justified.
The Applicant’s second appeal of the partial denial of DAC is for $7,483.22, which encompasses costs incurred after June 8, 2014, costs incurred in excess of $155 per hour, and costs associated with travel expenses.
Funding under the PA program is available for management costs, which are administrative expenses and any other expenses not directly chargeable to a specific project under a major disaster. In addition to these management 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. Where an applicant uses a contractor to perform administrative services, FEMA will consider certain factors when evaluating DAC, such as the method for contracting the services, the skill level of the people performing the activities, and the amount of time to perform an activity. In determining whether DAC are reasonable, FEMA considers whether contractors utilized appropriate skill level for the work, which for most PA projects is a junior or mid-level technical or program specialist (or equivalent), although, for complex projects, staff with a higher level of technical proficiency or experience may be appropriate. Travel and per diem costs for contractor employees are eligible as direct costs only if such costs can be attributed to individual projects. Travel expenses not tied to one specific project are indirect expenses, and may be reimbursable as § 324 management costs, not DAC.
When choosing a vendor to provide administrative services, applicants must comply with all procurement requirements. Accordingly, a contract award must comply with both federal procurement standards, and an applicant’s own procurement standards. For large projects, this generally means that the contract must provide for full and open competition, for example, by receiving sealed bids or competitive proposals from a number of vendors following a public solicitation. Under federal regulations, noncompetitive procurement, whereby a proposal is received from only one source, may only be used when it is not feasible to use a competitive procedure and a specific justification exists, such as when a public exigency or emergency will not permit a delay resulting from competitive solicitation.
Typically, FEMA finds an exigency when lives or property are at stake, where the contract is for actual work to restore critical services, or where the contract is for work that is not permanent in nature. By contrast, the administrative services that can be funded as DAC are activities such as identifying damage, attending briefings, establishing files and oversight procedures, providing documentation, preparing for audits, working with federal and state authorities to monitor projects, developing cost estimates, and collecting cost data. Even if administrative services are performed during the exigency period, FEMA does not generally view them as critical services or as activities that protect life or property.
Where an applicant materially fails to comply with a term of a federal grant, such as complying with local and federal procurement standards, FEMA has discretionary enforcement authority, which it exercises on a case-by-case basis. FEMA’s range of authorized actions includes disallowing all or part of the cost of the activity or action not in compliance. In exercising this discretionary authority, the selected action must be appropriate to the circumstances and, to the extent that FEMA allows funding, FEMA must consider the reasonableness of the costs. 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.
Here, the Applicant’s contract award to Witt was a noncompetitive procurement. The Applicant contends that a noncompetitive procurement was allowable under its own procurement guidelines as well as federal procurement standards under a public exigency or emergency exception to the competition requirement.
The Applicant has stated that the initial Witt contract was necessary, but it has consistently failed to explain why it was necessary to enter into a multi-year, multi-million dollar contract for administrative services without the benefit of competition within ten days of the disaster. It has not explained why it was not feasible to use a competitive procurement process under the circumstances. Even accepting that there was a public exigency that required Witt’s services, the Applicant has not explained why such an exigency would not allow it to take the time for a competitive solicitation, particularly where the contract was for an extended period of time and in excess of $3 million. Additionally weighing against the Applicant’s argument is the fact that this procurement was for administrative services. As noted above, FEMA does not generally view an administrative services contract as one which is necessary to meet an emergency need or resolve an exigency. Even if there were hypothetical circumstances in which noncompetitive procurement of such a contract could be justified under an emergency exception, here, the Applicant’s three-year contract clearly exceeded any exigency, and so would not qualify for an emergency exception.
The Applicant’s second contract with Witt entered into through HGAC, Task Order No. 1, does not change this result, regardless of whether it is viewed as a new contract or modification to the original agreement. If viewed as a new contract, Task Order No. 1 was executed in December 2011, and the Applicant has not explained why noncompetitive procurement was necessary at that point, which was seven months removed from the disaster. If viewed as a contract modification, as the RA correctly explained, a later modification could not remedy the initial noncompliant procurement.
Finally, the Applicant has also attempted to justify its decision to use noncompetitive procurement by emphasizing that Witt’s price schedule was reasonable. Even accepting for the sake of argument that the contract costs were reasonable, it would not change the result because this is a separate issue. The fact that costs are reasonable does not excuse noncompliance with procurement regulations.
Accordingly, the RA correctly determined that the Applicant’s DAC contract with Witt was noncompliant.
Because of the procurement noncompliance, FEMA had discretionary enforcement authority to award reasonable costs or to disallow all costs. Here, the RA elected to award certain costs determined to be reasonable. Specifically, the RA awarded actual DAC for those hours billed at less than $155 per hour through June 8, 2014. This represented the majority of DAC hours, which were billed at approximately $133 per hour. What the RA disallowed were: (1) hourly costs billed above $155 per hour, (2) costs for hours billed after June 8, 2014, and (3) costs associated with travel expenses for Witt staff. These costs are the subject of this second appeal, and each of these will be addressed in turn.
Regarding hours billed above $155 per hour, two things should be noted at the outset. First, the RA did not disallow those costs in their entirety, but rather awarded costs at a rate of $155 per hour. Second, the RA did not determine that $155 per hour was the only reasonable hourly rate. Rather, the RA acted in accordance with prior regional communication about the issue which stated that, where an applicant sought reimbursement for DAC over the $155 per hour rate, it needed to provide a justification for the higher rate being reasonable under the circumstances. The Applicant had the opportunity to provide such justification, but only argued that Witt’s rates were the same as those offered to other federal and state entities. It failed to offer a justification of why staff members billing at an hourly rate higher than $155 for a number of hours was appropriate to the work required for this project, which is what is required for reimbursement of DAC. In light of the lack of justification for a higher rate, it was within the RA’s discretion to limit the award to $155 per hour as part of the enforcement action for the procurement noncompliance.
Regarding costs for hours billed after June 8, 2014, the RA disallowed these costs because they were not incurred pursuant to an active contract between the Applicant and Witt. To clarify the timeline, the Applicant’s initial contract with Witt ran until June 8, 2014. The Applicant’s second contract with Witt (Task Order No. 1) ran until May 31, 2013. The Applicant did not execute a new contract with Witt (Modification No. 1) until January 15, 2016. The 2016 contract purported to be retroactive to June 1, 2013. That the contract was backdated, however, does not change the fact that there was no contract in place during the period in which the disallowed costs were incurred. If, as the Applicant has maintained, Task Order No. 1 replaced the initial contract with Witt, then there was no contract in place between June 1, 2013, and January 15, 2016. In the past, FEMA has determined that DAC incurred without a contract are ineligible for PA funding. Despite this, the RA decided to allow costs incurred up to June 8, 2014, because that was the period of the original contract. The RA’s exercise of discretion was an appropriate enforcement action to address the procurement noncompliance.
Finally with respect to Witt’s travel costs, it should be noted that, although the Applicant and First Appeal decision discussed these costs separately, these were also DAC which were disallowed following a procurement noncompliance. As the RA correctly noted, in order to reimburse travel costs, FEMA requires that they be tied to one single project. Notwithstanding any other federal cost attribution guidelines, where travel costs are incurred for the benefit of multiple projects, FEMA does not treat them as DAC. Accordingly, the RA’s decision to disallow these costs as part of the enforcement action was appropriate.
The RA properly determined the Applicant’s request was ineligible because the Applicant failed to seek additional funding in a timely manner. Moreover, the Applicant did not substantiate its claim that the project’s CEF was incorrect or the estimate was improper. With respect to DAC, the Applicant’s contract award to Witt was the result of an impermissible noncompetitive procurement. The RA exercised appropriate discretion by awarding partial costs as an enforcement measure. The RA also acted appropriately by declining to award hourly costs billed above $155 per hour, costs for hours billed after June 8, 2014, and costs associated with travel expenses for Witt staff. Accordingly, this second appeal is denied.
 Letter from Chief Fin. Officer, Joplin Schools, to Dir., Mo. State Emergency Mgmt. Agency, at 1 (Mar. 13, 2013).
 Letter from Dir., Recovery Div., FEMA Region VII to Dir., Mo. State Emergency Mgmt. Agency (May 2, 2013).
 Letter from Chief Fin. Officer, Joplin Sch. Dist. to Mo. State Emergency Mgmt. Agency, at 1-2 (June 30, 2014).
 The Applicant’s request stated that these costs were higher, but in context it is clear that it meant to say that the Kansas City project costs were lower than the equivalent projects in Joplin.
 Letter from Recovery Div. Dir., FEMA Region VII to Dir., Mo. State Emergency Mgmt. Agency (Aug. 7, 2014).
 Letter from Chief Fin. Officer, Joplin Sch. Dist. to Mo. State Emergency Mgmt. Agency, at 1-3 (Jan. 26, 2016).
 While the determination memorandum did not explicitly reference travel expenses, it disallowed the difference between the claimed hourly rate for a Witt employee and the contract hourly rate for that employee. That difference was comprised of the employee’s travel expenses that the Applicant had allocated to PW 1799 by incorporating them in the hourly rate for each Witt employee.
 The determination memorandum contained several inadvertent errors. For example, in one place it referenced “elementary school grounds” rather than the concession stand specifically or the high school grounds generally. Moreover, it gave the date of the final obligation in various places as: October 11, 2012; March 3, 2013; March 14, 2013; and April 12, 2013. The Applicant noted these errors in its first appeal. Nevertheless, despite these errors, it was clear what FEMA’s determination was, they did not change the determination memorandum’s reasoning, and using the correct dates (which are provided above) would not have led to a different outcome.
 Email from Chief Fin. Officer, Joplin Sch. to FEMA, at 1 (Apr. 20, 2012, 6:05 PM).
 Email from FEMA to Chief Fin. Officer, Joplin Sch., at 1 (April 21, 2012, 9:55 AM).
 The RA denied the first appeal, in part, based on the Applicant’s untimely submission of the appeal. FEMA’s August 7, 2014 denial of the Applicant’s request for the additional funding, however, did not inform the Applicant of their appeal right, and the format, content, and timeframe requirements outlined in 44 C.F.R. § 206.206. See Recovery Directorate Manual, Public Assistance Program Appeal Procedures, Version 3, at 11 (Apr. 4, 2014). Accordingly, FEMA will consider the Applicant’s second appeal.
 44 C.F.R. §§ 206.201(j)-(k), 206.226 (2010); Public Assistance Guide, FEMA 322, at 79 (June 2007) [hereinafter PA Guide].
 44 C.F.R. § 206.203(d)(1); PA Guide at 110.
 PA Guide at 110.
 FEMA Second Appeal Analysis, Nashville-Davidson Cty., FEMA-1909-DR-TN, at 4 (Sept. 25, 2015) (approving cap increase where it was discovered during performance of eligible work certain items could not be repaired and required replacement).
 FEMA Second Appeal Analysis, Clarke Elec. Coop., FEMA-1737-DR-IA, at 3-4 (Jan. 12, 2015) (approving cap increase where applicant submitted new estimating methodology for a complex project and a FEMA engineer agreed).
 FEMA Second Appeal Analysis, Town of Killington, FEMA-4022-DR-VT, at 7-8 (Dec. 7, 2017).
 Id. at 4, 7-8.
 FEMA Second Appeal Analysis, Los Angeles Cty., FEMA-1577-DR-CA, at 4-5 (Sept. 11, 2012).
 PA Guide at 139-140.
 PA Guide at 140.
 CEF for Large Projects Instructional Guide V2.1, at 1-2 (Sept. 2009) [hereinafter CEF Guide].
 Id. at 3-3.
 Id. at 4-8.
 Id. App. E, at 5.
 Id. at 1-2.
 44 C.F.R. § 206.206(a); FEMA Second Appeal Analysis, Vill. of Waterford, FEMA-4020-DR-NY, at 4 (Sept. 4, 2014).
 The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 324(a), 42 U.S.C. § 5165b(a) (2011); Disaster Assistance Policy DAP 9525.9, Section 324 Management Costs and Direct Administrative Costs, at 2-5 (Nov. 13, 2007).
 DAP 9525.9, at 2, 5.
 Id. at 5.
 Memorandum from Assistant Adm’r, Disaster Assistance Directorate, FEMA, to Reg’l Adm’rs, FEMA, at 2 (Sept. 8, 2009) [hereinafter DAP 9525.9 Guidance Memo].
 Id.; see also FEMA Second Appeal Analysis, City of Cedar Rapids, FEMA-1763-DR-IA, at 4-5 (May 19, 2014) (finding that an hourly rate of $285 for administrative services was unreasonable absent evidence that the tasks performed were particularly complex).
 DAP 9525.9 Guidance Memo, at 3.
 Id., attach. at 1-3.
 DAP 9525.9 Guidance Memo, at 2.
 44 C.F.R. § 13.36(b)(1); PA Guide, at 51.
 44 C.F.R. § 13.36(c)(1), (d)(1)-(3); PA Guide, at 51-52.
 44 C.F.R. § 13.36(d)(4)(i); PA Guide, at 52.
 FEMA Second Appeal Analysis, Martinsville CUSD, FEMA-1771-DR-IL, at 4 (July 19, 2016); FEMA Second Appeal Analysis, Columbus Reg’l Hosp., FEMA-1766-DR-IN, at 7-8 (Dec. 27, 2017).
 Columbus Reg’l Hosp., FEMA-1766-DR-IN, at 8; see also DAP 9525.9 Guidance Memo, attach. at 1-3;
 Columbus Reg’l Hosp., FEMA-1766-DR-IN, at 8; see also FEMA Second Appeal Analysis, City of Pierre, FEMA-1984-DR-SD, at 11 (May 27, 2015) (defining exigency as “something that is necessary to a particular situation that requires or demands immediate aid or action”)
 44 C.F.R. § 13.43(a); FEMA Second Appeal Analysis, City of Nome, FEMA-4050-DR-AK, at 5 (Sept. 28, 2016).
 44 C.F.R. § 13.43(a).
 City of Nome, FEMA-4050-DR-AK, at 5-6.
 2 C.F.R. Part. 225, App. A § (C)(2).
 In its first appeal, the Applicant appeared to argue that Task Order No. 1 was a competitive procurement because of how HGAC identified vendors. In its second appeal, however, the Applicant’s position is that HGAC simply confirmed the reasonableness of the original procurement. Accordingly, it does not dispute that it never competed the DAC contract.
 While the identification of Task Order No. 1 as a new contract or a contract modification is not important to the question of compliant procurement, it will be important to the question of reasonable costs, which will be addressed later.
 Letter from Reg’l Adm’r, FEMA Region VII, to Dir., Mo. State Emergency Mgmt. Agency, at 1‑2 (June 23, 2011).
 Contrary to the Applicant’s assertion on second appeal, the RA did not determine that a three-year contract was impermissible. These costs were denied because there was not an active contract in place at the time.
 See, e.g., City of Cedar Rapids, FEMA-1763-DR-IA, at 4-5 (finding that DAC incurred without a contract in place was ineligible for PA funding); City of Nome, FEMA-4050-DR-AK, at 5 (finding that without a written contract, the documentation required by federal regulations cannot exist).
 DAP 9525.9 Guidance Memo, attach. at 1-3.