Net Small Project Overrun

Appeal Brief

Appeal Letter

Appeal Analysis

Background           

From December 17, 2010 to January 4, 2011, winter storm flooding and rainwater runoff caused extensive damage to equipment at South San Luis Obispo County Sanitation District’s (Applicant’s) Oceano facility (Facility).  Excessive inflow damaged four influent pumps and the electrical system supporting the Facility’s headworks.

FEMA prepared project worksheet (PW) 792 to reimburse the Applicant for work to repair the damaged components.  The Applicant contracted with eight contractors to complete the repairs.  On July 1, 2011, FEMA obligated PW 792 with an estimated cost of $40,329.40 ($40,007.40 for repair work and $322.00 for direct administrative costs).  The Applicant completed the work associated with PW 792 on June 13, 2012.

First Appeal - Net Small Project Overrun Request  

In a letter dated October 10, 2012, the California Emergency Management Agency (Grantee) requested that FEMA Region IX approve a net small project overrun for PWs 272, 792, and 793.  No adjustments in costs were requested for work covered by PWs 272 and 793.  For PW 792, the Applicant requested $110,018.97, while the Grantee recommended $104,895.28,[1] in additional Public Assistance (PA) funding for work completed by six contractors.  As part of the Federal Final Inspection Report for Application Closeout, submitted concurrently with the net small project overrun, the Grantee provided FEMA with a narrative explanation of overrun costs, a spreadsheet that listed and briefly described 142 invoices submitted by contractors, and copies of the invoices.                          

On March 26, 2013, Region IX partially granted the Applicant’s first appeal request for a net small project overrun.  FEMA reviewed the invoices and the spreadsheet provided by the Applicant and questioned the eligibility of the work described in 74 of the 142 invoices submitted by the eight contractors.  The first appeal decision also noted that work performed by three of the Applicant’s contractors,  Wallace Group, Woeste Electric, and Wescorp, appeared to be outside the scope of work for PW 792.  Region IX determined that the inflow/infiltration investigation was not necessary to repair the influent pumps and the electrical system supporting the Facility’s headworks.  Electrical work, as documented in some of the invoices, was also not clearly disaster related because it addressed a preexisting problem with circuit breaker coordination and a tendency for the electrical system to short circuit.  Lastly, Region IX found that invoices addressing work on downstream components of the wastewater treatment plant (i.e. the clarifier system, generators, and other pumps) were outside the scope of work for PW 792.[2]

FEMA Region IX prepared a new project worksheet, PW 1156, to fund the small project overrun in the amount of $37,414.60, and obligated the additional funding on April 9, 2013. 

Second Appeal

In a letter dated August 12, 2013, the Grantee forwarded to FEMA the Applicant’s second appeal dated June 5, 2013, requesting an additional $39,675.72 to fund cost overruns for work documented in PW 792.[3]  The Applicant provides an attached table that lists the requested costs by invoice with a brief description of the work.

On January 30, 2014, FEMA sent a request for information (RFI) to the Applicant to request a breakdown by invoice number of the total costs that it believes to be eligible under PW 792 and to indicate which costs FEMA obligated as a result of the PW, costs FEMA obligated as a result of the first appeal response, and costs being requested on second appeal.  On February 26, 2014, the Applicant responded to FEMA’s RFI.  Upon further review, the Applicant acknowledged it mistakenly included an additional $14,773.50[4] in funding in its second appeal request that was originally obligated in PW 792 and not subsequently deobligated on first appeal.  Accordingly, the Applicant revised down the amount of its second appeal from $39,675.72 to $24,902.22.  Table 1 provides a breakdown of the additional $24,902.22 in cost overruns that the Applicant seeks on second appeal.  None of these costs have been previously obligated in PW 792 or in PW 1156, following the first appeal.

Table 1

The Applicant’s RFI response also revealed that FEMA mistakenly obligated PA funding associated with eight invoices twice.  FEMA obligated $9,026.80 in PW 792 to reimburse the Applicant for the eight invoices and, following the first appeal, mistakenly obligated PW 1156 for the same invoices in the same amount.[6]

Discussion

During the execution of approved work, an eligible applicant may find that actual project costs exceed the approved PW estimate, resulting in a cost overrun.[7]  When this occurs, the applicant must evaluate each cost overrun and, when justified, submit a request for additional funding through the grantee to the Regional Administrator.[8]  All small project cost overrun requests are considered first appeals and must contain sufficient documentation to support the eligibility of all claimed work and costs.[9]  To be eligible for PA funding, an item of work must be required as the result of the emergency or major disaster.[10]

The following subsections consider whether the work performed by the Applicant’s contractors is eligible for PA funding.  The subsections allot the invoices into four groups based on the underlying type of work. 

California Electric Supply Invoice

California Electric Supply (CES) submitted invoice number 1070535 in the amount of $2,400.00.  The description of work states that engineering services rendered were for the purpose of setting all breakers in the Facility in accordance with the Short Circuit Study, which was commissioned to explain why the influent pump breakers all shut off at the same time.  The Short Circuit Study found potential coordination issues as well as other unrelated short circuit issues.[11]  CES was hired to implement the recommended changes related to coordination issues identified in the Short Circuit Study for $2,400.00.[12] 

FEMA reviewed the Short Circuit Study and determined that none of the changes recommended by the Short Circuit Study addressed damage caused by the declared disaster.  The objective of the study was to: (1) perform a short-circuit study on the existing electrical distribution system in order to determine the available fault current at pertinent locations throughout the distribution system; (2) evaluate the short-circuit ratings of protective devices and other distribution equipment; (3) review existing system overcurrent protection and coordination (where applicable, provide suggestions for improvement); and (4) provide specific recommendations for improving the electrical distribution system performance and correcting any deficiencies found by the studies.[13]  The Short Circuit Study does not mention the disaster or the need to restore damaged components or fix problems caused by the disaster.  Therefore, the costs documented in the invoice from CES are ineligible because the Applicant has not demonstrated that the work performed by CES was required as a result of the disaster.

Wallace Group Invoices

The Wallace Group was the Applicant’s prime contractor and submitted invoice numbers - 31597, 31718, 31838, 31976, 32127, 32294, 32323, 32508, and 32663 for total payment of $15,761.45.  Based on the Applicant’s second appeal and RFI response, FEMA determined that the work associated with these invoices involved rerouting power supply conduits with J-boxes and design work necessary to replace wiring around headworks to breaker panels.[14]  The invoices contain descriptions of the work rendered, such as: procurement, review of contractor activity, bid process activities, review of drawings and specifications, review of contractor work, and processing payments.

The information provided within the invoices is inconsistent and ambiguous and does not reference work performed to restore the facility to predisaster condition.  First, the amount requested on second appeal for these invoices ($15,761.45), does not match the amount documented in the invoices ($15,540.20).  Second, the work described in the invoices includes work to coordinate and procure the Short Circuit Study and replace an assortment of components.  The Applicant did not distinguish between the components that were replaced as a result of the disaster and those that were replaced due to the Short Circuit Study, which as previously discussed are ineligible.  The documentation provided by the Applicant does not sufficiently demonstrate which component replacements are disaster-related.  As a result, none of the costs documented in the Wallace Group invoices are eligible for PA funding.    

First Set of Woeste Invoices

The first set of Woeste invoices pertain to work documented in invoices CCO#3 – 7049, CCO#3 – 6489, CCO#3 – 6490, and CCO#3 – 6491 for a total payment of $3,135.38.  The Applicant’s description for these four invoices in both the second appeal and the RFI response was the same: “Replace shunt trip switch and wiring / Shunt trip work.”[15]  According to the Applicant, the “[e]lectrician replaced shunt and rewired to pumps” because “water got into shunt trip inside headworks room and tripped the switches”[16]  The invoices provided additional information about the work completed, including the actual steps taken to remove the faulty shunt switch, remove old wire, install new shunt trip circuits, and test the circuits.

The Applicant provided sufficient documentation to demonstrate that the work documented in the first set of Woeste invoices pertains to the restoration of components damaged by the disaster.  Therefore, the costs documented in the first set of Woeste invoices are eligible for PA funding in the amount of $3,135.38.   

Second Set of Woeste Invoices

The second set of Woeste invoices pertain to work documented in invoices CCO #2 -7046, CCO #2 – 7044, and CCO #2 – 7045 for a total payment of $3,605.39.  The Applicant’s description for these three invoices in both the second appeal and the RFI response was the same: “Inst conduit seals / Conduit Seal Offs.”[17]  In the second appeal, the Applicant also states that this “work is related to FEMA [damage] because water went down the conduits and entered the boxed and shunt trip areas.”[18]  The invoices provided additional information about the work completed, including information about how much sealing was done around certain conduits.

The Applicant provided sufficient documentation to demonstrate that the work to seal off the conduits was incidental but necessary to rewire and repair shunt trip areas.  Therefore, the costs documented in the second set of Woeste invoices are eligible for PA funding in the amount of $3,605.39.    

Improper Obligation and Funds Awarded on First Appeal

FEMA mistakenly obligated funds associated with eight invoices twice.  FEMA obligated $9,026.80 in PW 792 to reimburse the Applicant for the eight invoices.  Following the first appeal, FEMA obligated PW 1156 for the same invoices in the same amount.[19]  Accordingly, FEMA Region IX must deobligate $9,026.80 from PW 1156 so that the Applicant does not receive two reimbursements from FEMA for the same work.

Conclusion

The Applicant provided sufficient documentation to demonstrate that additional work in the amount of $6,740.77 was necessary to restore damaged components of the Facility.  Specifically, work associated with Woeste invoices CCO#3 – 7049, CCO#3 – 6489, CCO#3 – 6490, CCO#3 – 6491, CCO #2 -7046, CCO #2 – 7044, and CCO #2 – 7045 is eligible for PA funding.  The Applicant has not demonstrated that the work documented in the Wallace Group and CES invoices was required as a result of the disaster and is therefore inelgible.  FEMA Region IX must deobligate $9,026.80 from PW 1156 so that the same work is not reimbursed twice.    The net deobligation is $2,286.03.